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EU okays Italian compensation for power cuts in Sardinia and Sicily

The European Commission has authorised under EU State aid rules a scheme designed to remunerate companies for the provision of instant interruptibility services (the acceptance of power cuts to avoid black outs) in Italy's largest islands, Sardinia and Sicily.

The Commission has concluded that the scheme, which is limited to three years, does not constitute state aid, because it remunerates at market price a service which is necessary to ensure the continuity of electricity supply on these islands.

"Interruptibility is a valuable service that companies can render to the electricity network to avoid black outs. The Italian scheme will ensure the continuity of electricity supply in Sardinia and Sicily until structural networks problems, due to the particular situation of these islands, can be addressed. The scheme does not involve state aid in view of these specificities and because the remuneration of the service is established by public tender", said Competition Commissioner Joaquín Almunia.

Instant interruptibility services consist in companies accepting cuts in their electricity supply without prior notice. It is a service typically provided by companies to the network operator in order to prevent black-outs.

Already in 2008 the Italian network operator identified certain specific difficulties in ensuring the continuity of electricity supply in Sardinia and Sicily. These difficulties are linked, in particular, to the islands' insufficient electrical interconnection with the mainland, the presence of large but obsolete power plants which are prone to outages and a high proportion of unpredictable wind-power generation. On the basis of this analysis, the network operator considered it necessary to resort to a higher proportion of interruptible resources than on the mainland for a transitional period of three years, during which the structural problems will be addressed.

The network operator will therefore tender out 500 MW of interruptible capacity in Sicily and Sardinia. The tender conditions are not restrictive, as the minimum consumption threshold is only 1 MW. According to Italy, a sufficient number of companies is able to meet the tender criteria on both islands. The scheme will last for three years and companies must commit to provide interruptible resources for the whole period.

The Commission concluded that, since there is a genuine short-term need for more interruptible resources and since the remuneration, which is established by public tender, should in principle reflect the market value of the service provided, the measure does not constitute state aid. This conclusion, which is based on an analysis of the current situation on the islands, is limited to the duration of the scheme (three years).

The non-confidential version of the decision will be made available under the case number NN 24/2010 in the State Aid Register once any confidentiality issues have been resolved.

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