JOAQUIN ALMUNIA

VICE-PRESIDENT OF THE EUROPEAN COMMISSION

Brussels, 17 July 2012

Dear Mr. losifldis, Thank you for your letter of 28 May 2012, in which you express your concerns with the decision of the Hellenic Republic to privatise four lignite-fired power plants, all operating within the "Network of Energy Producing Municipalities". You indicate that both competition and economic growth would be better promoted if exploitation rights were granted to third parties on the Drama, Ellasona, Vevi and Vegora lignite deposits, as initially proposed by the Hellenic Republic. First, in order to provide some context to the above decisions of the Hellenic Republic, I would like to outline the main events in the Commission's competition case (38700 - Greek Lignite). On 5 March 2008, following a detailed investigation, the Commission adopted a decision (the 2008 Decision) finding that Greece had violated EU competition rules by giving the Public Power Corporation (PPC) privileged access to lignite, as compared to other power producers. As you correctly pointed out in your letter, the first measure that the Greek government proposed to remedy that competition problem was to grant third parties access to four lignite deposits. Those measures were accepted by the Commission, and rendered binding upon Greece by Commission Decision of 4 August 2009 (the 2009 Decision). However, the Greek government subsequently took the view that this remedy was not in line with its environmental policy, which involved a decreased use of lignite. Therefore, it requested a review of the Commission's 2009 Decision, and proposed other measures. The Greek government's final proposal to remedy the competition problem consisted in selling four lignite-fired power plants owned by PPC and to offer swap drawing rights of 550 MW from PPC's lignite-fired power plants Kardia 1 and Kardia 2.

Mr. losifidis President Network of Energy Producing Municipalities Filotas, Papagou 10 53070 Amyntaio
Greece

BERL 11/238 - BE-1049 BRUSSELS - TEL.: +32-2-298.09.00 - FAX : +32-2-298.09.97 - E-MAIL : cab-almunia-archives@ec.europa.eu

For the sale of the power plants, it is important to note that according to the proposal existing lignite supply contracts would be taken over by the new owners of the power plants in their current form (or where necessary new contracts would be put in place in advance by PPC) so that the exploitation of the lignite mines should not, as such, be affected by the measures. In your letter, you raise the question of the risk that power plants might be purchased by unreliable investors. I share your concerns on this issue and this is why the proposals contain safeguards: in particular any purchaser would need to meet the relevant criteria to obtain the permits to operate a power plant in Greece required by the Greek Regulatory Authority for Electricity (RAE). You also underline that the Greek state's decision to sell plants was taken without any prior consultation of local authorities and you ask the Commission to intervene to ensure that local authorities are given a more prominent role. In this context, I have to underline that it is the Greek state which is responsible for finding and proposing a solution to the competition concerns identified in the Commission's 2008 Decision, taking into account relevant national legal considerations (including environmental-laws) and~policy considerations. Indeed, it is for each Member State to decide on what energy sources are used (i.e. the "energy mix") within its own territory. It is also for each Member State to decide on the national administrative procedure for adopting such decisions. The Commission is only competent to intervene if the Member State's decision on the use of energy sources violates EU legislation. Finally, you raise environmental concerns, in particular you question if new owners would be bound by any obligation to restore environment and soils. As noted above, this is primarily an issue under national law, but note that the proposal also stipulates that PPC and the new owners will bear liability for decommissioning costs in proportion to the length of their ownership. Yours sincerely,