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State Aid

State Aid: Electricity producers must pay market price for using natural resources




Iceland must introduce legislation to ensure that electricity producers using public natural resources always pay market price for those rights. This is proposed by the EFTA Surveillance Authority (ESA) in a decision adopted today.

The Icelandic authorities have on numerous occasions granted electricity producers, which have obtained licences to construct power plants, rights to utilise public natural resources to generate hydroelectric or geothermal energy. However, there is no legal act establishing the required content of such agreements nor is there a clear legal requirement for the payment of a market-based remuneration or published and precise criteria for determining such remuneration.

“In order to guarantee fair and effective competition on the Icelandic electricity market, it is imperative that electricity producers pay a market price for using natural resources. The Icelandic authorities must enact legislation, which provides that such market remuneration is always required when rights to utilise public natural resources are transferred to electricity producers. To ensure equal treatment, the Icelandic authorities shall also establish a clear and transparent methodology for determining market price.”, Mr. Sven Erik Svedman, President of the EFTA Surveillance Authority, said.

The proposed measures include inter alia that the Icelandic authorities introduce a legal obligation establishing that any transfer of rights to utilise public natural resources for electricity generation takes place on market terms. This obligation would be binding for all public entities. Moreover, the Icelandic authorities shall establish a clear methodology to fix the price of the natural resources to ensure that all operators receive equal treatment.

The Authority has also stipulated that the Icelandic authorities review all existing contracts to ensure that all companies pay a correct market remuneration for the remainder of those contracts.

The Icelandic authorities have one month to notify the Authority whether they accept the proposed measures. If the Icelandic authorities do not accept the measures the Authority may initiate a formal investigation procedure.

A non-confidential version of today's Decision will be published in the register of state aid decisions on the Authority's website, normally within a month.


For further information, please contact:

Mr. Andreas Kjeldsberg Pihl
Press & Information Officer
tel. (+32)(0)2 286 18 66
mob. (+32)(0)492 900 187

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