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ESA orders recovery of illegal state aid in Bergen road lights case

Nelfo, assisted by Simonsen Vogt Wiig, complained to the EFTA Surveillance Authority (ESA) about the municipality of Bergen's overcompensation to BKK for maintenance of road lights. ESA has now concluded that Bergen has overcompensated BKK, and that the illegal state aid must be recovered.

Nelfo is a national trade association for electro, IT, electronic communications, system integrators, and lift companies in Norway. The main point addressed in the complaint to ESA was the allegation that the municipality had overcompensated companies within the BKK Group for maintaining and operating street lights along municipal public roads. Furthermore, the complaint concerned the municipality’s financing of 12,000 new LED lights installed on roadside infrastructure owned by Veilys AS – a subsidiary of BKK. In the complaint, it was emphasised that several suppliers would have been willing to compete for operation and maintainance of the streetlights against remuneration, and that such services constitute an ordinary economic activity, and thus should be exposed to competition.

The origins of the case dates back to 1996 when the municipality of Bergen sold Bergen Lysverker to BKK DA. That transaction also covered the streetlight infrastructure, and the infrastructure was not valued separately. In 2012, the municipality and BKK Nett AS concluded a service and maintenance contract. It originally comprised 18,228 lamp points. Of these, 16,082 were controlled by the BKK Group, while the city kept ownership of 2,146. The contract stipulated remuneration “per lamp point” and compensation for capital costs. The contract has since been extended several times. During the period, BKK Group transferred the streetlight infrastructure to its subsidiary Veilys AS, and the maintenance was to be carried out by another BKK Group company – BKK EnoTek AS.

In its decision, ESA pointed out that it is common practice in Norway and the Bergen area to provide maintenance and operational services on road light infrastructure for remuneration in a competitive market. ESA indicated that this type of activity is of an economic nature. The sales agreement from 1996 had resulted in the municipality selling, and BKK DA buying, an ordinary undertaking. While that agreement included provisions on future access to street lights and related services, it contained nothing to the effect that the municipality transferred any form of public service obligations to BKK. The same was true for the subsequent streetlight contracts entered with companies in BKK Group.

ESA found that

“… they reflect the municipality purchasing from a seller controlling a necessary input, as opposed to entrusting public service obligations. As for the maintenance and operation of those streetlights owned by the municipality, it has been procured as an input into the municipality’s provision of streetlighting through this infrastructure. Both sets of activities have been included in the contracts without any stipulation, or indication that the companies in the BKK group have been entrusted with an SGEI [service of a general economic interest].”

ESA concluded that the municipality had overcompensated the BKK Group for the maintenance and operation of street lights. That overcompensation to BKK – the advantage – thus constituted illegal and incompatible state aid under Article 61 EEA. In essence, this was fully in line with the complaint.

Norway must now ensure full recovery of the illegal state aid granted to BKK within four months.

SVW’s lawyers Jan Magne Langseth and Erik M. Klevmo represented Nelfo in the complaint case.