Services of General Economic Interest (SGEI)

On 20 December 2011, following extensive public consultation, the EC adopted a Communication outlining a new package of State aid rules for Services of General Economic Interest (SGEI).

Background

An SGEI is a service of an economic nature that public authorities identify as being of particular importance to citizens, but which are not supplied by market forces alone, or at least not to the extent and under the conditions required by society. Their provision may therefore require public intervention.

Examples of SGEI range from providing large commercial services to the entire population at affordable conditions (such as postal services, energy security of supply, electronic communication services, public transport), to a wide range of health and social services (such as care for elderly or disabled people).  SGEI are carried out in the public interest under conditions defined by the State, which imposes a public service obligation on the provider(s).

Since SGEI provision under such conditions may not generate a (sufficient) profit for the provider, public service compensation might be needed to offset the additional costs stemming from the public service obligation.

Summary of the newly adopted SGEI package

On publication of the new SGEI package, the Commission Vice-President in charge of competition policy, Joaquín Almunia, stated that "the new SGEI package provides Member States with a simpler, clearer and more flexible framework for supporting the delivery of high-quality public services to citizens which have become even more necessary in these crisis times."

The new SGEI package has three main strands and aims to provide clarification of key concepts in the field of State aid for SGEI.  The new SGEI de minimis regulation aims to provide simplification for small, local SGEI, for which compensation below a given threshold is deemed not to constitute State aid.  The new SGEI Decision acts as a block exemption from notification of compensation that is State aid, but fulfils relatively simple compatibility criteria. Finally, the revised SGEI Framework includes a more thorough check for large compensation amounts that have to be notified to and assessed by the Commission.

SGEI de minimis

The SGEI De Minimis Regulation is a new provision. It allows:

  • up to €500,000 to be granted over three fiscal years
  • the aid can only be given for the provision of an SGEI
  • any form of de minimis aid granted must be cumulated and cannot exceed the €500,000 threshold
  • the €500,000 de minimis aid under this Regulation cannot be cumulated with any compensation in respect of the same SGEI regardless of whether it constitutes state aid
  • the aid can be given as a grant, a loan or a loan guarantee
  • there must be a form of entrustment between the beneficiary and the aid grantor
  • the aid grantor must inform the recipient  that it is being given as de minimis aid
  • records must be kept for 10 fiscal years from the date on which the aid was granted

De minimis aid cannot be cumulated with other compensation for the same service, including aid-free compensation under Altmark. In terms of interaction with general de minimis aid, cumulation up to an aggregate amount of €500,000 is permitted.

View the EC's full text of the SGEI de minimis Regulation.

SGEI Decision

The new SGEI Decision exempts Member States from the obligation to notify public service compensation for certain SGEI categories to the Commission. The main features are as follows:

1. The exemption allows unlimited spend in the area of social services. This used to just specify funding for social housing and hospitals. Now the Commission have extended this to include “clearly identified services, meeting social needs as regards health and long-term care, childcare, access to and reintegration into the labour market, the care and social inclusion of vulnerable groups.” 

2. For all other SGEI activity the compensation threshold has been lowered from €30 million to €15 million per annum. Any funding given above this threshold would have to be notified to the EC under the SGEI Framework.

3. The period of entrustment with an SGEI provider should be limited to 10 years.

4. Compensation for air and maritime links can be given where average annual traffic does not exceed 300,000 passengers.

5. Compensation to ports where average annual traffic does not exceed 300,000 passengers.

6. Compensation to airports where annual average traffic does not exceed 200,000 passengers.

7. Transparency - Any organisation receiving more than €15m of funding per annum which has commercial activities outwith the scope of the SGEI must publish details via the internet of the entrustment and the amounts of aid being granted to the undertaking on an annual basis.

8. Member States are required to submit a report on the implementation of this Decision every two years. The first report has to be submitted by 30 June 2014.

View the EC's full text of the SGEI Decision.

SGEI Framework

The SGEI Framework is to be utilised if compensation exceeds €15m per annum to undertakings operating a service outwith the field of social services.

The EC will assess SGEI funding for compatibility. An example currently operating in Scotland is the funding given to CalMac. Another example is NEST (National Employment Savings Trust) an occupational pension scheme for low to moderate earners which the UK notified in 2010. 

The main features of the new SGEI Framework are:

  • a more precise methodology is given for calculating the amount of compensation allowable
  • Member States must introduce efficiency incentives to encourage the entity providing the service to do so in the most efficient manner
  • any aid granted must comply with the relevant public procurement rules
  • when there are multiple organisations providing an SGEI the compensation must be calculated in the same way to avoid discrimination
  • Transparency: Member States funding an SGEI within the scope of the Framework must publish details on the internet
  • as with the SGEI Decision, the EC will request a report every two years. The first report will be submitted by 30 June 2014

View the EC's full text of the SGEI Framework.