BRUSSELS/PARIS European Union antitrust regulators are investigating whether green tax reductions granted by French authorities to energy-intensive users give the companies an unfair advantage.
France, which wants to boost the share of renewable energy to 23 percent of its energy mix by 2020 from the current 15 percent, subsidizes renewable with a tax called CSPE levied on consumers through their power bills but partially exempts energy-intensive industries.
Large industrial companies, which use at least 7 gigawatts per year, pay a reduced rate up to 0.5 percent of their annual value added and have their CSPE tax capped at 550,000 euros (indexed) per facility per year.
The European Commission said on Thursday such exceptions may breach EU state aid rules.
"The possibility of such reductions is not foreseen under the 2008 Guidelines on Environmental Aid which are currently applicable," the EU competition watchdog said in a statement. It can order EU governments to recover illegal aid.
Uniden, the French lobby for energy-intensive industries, said the Commission inquiry focuses on the legal formulation of the tax rebates, not the principle.
The Commission "is not questioning the principle of reducing the extra costs linked to renewable for energy-intensive industries", a Uniden spokesman said, adding that this kind of aid exists in several countries.
He said the CSPE cap is vital for those industries and that their competitive position would be hurt if they had to bear the full cost of renewable subsidies.
The French energy ministry declined to comment.
The Commission probe comes three months after it opened an investigation into Germany's industrial discounts on green energy surcharges to energy-intensive industries, concerned that these may distort competition.
The Commission also said it expects to adopt new guidelines on state aid in the fields of energy and environment for 2014-2020 and that, among other things, the new guidelines envisage that member states could partially relieve energy-intensive firms from financing renewable energy generation.
Asked why the Commission would want to open an investigation less than a month before the applicable legislation might change, a spokeswoman said the Commission must work under legislation that is currently applicable.
Competition specialists say new EU rules do not stop the Commission from going after companies or EU governments for past wrongdoing and that, since the CSPE was introduced in 2007, there is plenty of scope for the EU to find illegal state aid.
Separately, the Commission also cleared a French aid scheme for onshore wind power involving a new feed-in tariff decree.
The Commission said it had concluded that the French scheme is compatible with EU state aid rules: under the scheme, producers of renewable energy are compensated for additional production costs in line with EU guidelines, and do not receive overcompensation, it said.
"Wind sector professionals at the SER have greeted with relief the conclusions of the notification procedure. The wind support mechanism is now secure according to European union law, … which will kick off a recovery in new added capacity this year," France's SER renewable power lobby said in a statement.
The French wind power sector is now waiting for France's top administrative court to cancel the old feed-in tariff decree, which had not been notified to the European Union as state aid as it should have been.
France's failure to follow this procedure provided a basis for a pressure group opposing onshore wind power, Vent de Colere (Wind of Anger), to challenge France's preferential tariffs for wind energy in 2011 in a French court.
Legal uncertainty over the tariffs, which forced utility EDF to buy wind-generated power at above-market costs, has paralyzed investment in the French wind sector since 2011.
(Additional reporting by Marion Douet and Geert De Clercq; Writing by Foo Yun Chee and Geert De Clercq; Editing by William Hardy and Dale Hudson)