Electric utilities defend right to extend discounts to large shareholders

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Finnish Energy Industries (ET) has launched a massive defence of the so-called Mankala principle, which is in widespread use in Finnish electricity production.
      Under the practice, companies that are shareholders in companies which generate electricity are entitled to a buy electricity at cost price. The amount of cut-rate electricity that they are entitled to is proportionate to the share that they have in the company itself.
     
Green Members of the European Parliament Satu Hassi and Heidi Hautala sent an inquiry on the matter to the European Commission in May.
      The MEPs suspect that the practice might violate the EU’s rules on competition and state subsidies, in that it could be seen as a form of tax evasion, and an indirect way of handing out dividends.
      The matter has a direct bearing on upcoming Parliamentary debate on a government proposal on behalf of granting licences for two new nuclear reactors. The companies behind the applications, Fennovoima and TVO, both operate under the Mankala principle.
     
ET has submitted a memo to the Commerce Committee of the Finnish Parliament, in which it examines the historic background of the system.
      The paper emphasises that the system is an old one, and is not specifically linked with nuclear energy. It has long been used in the construction of hydroelectric power, coal power, and in plants with produce both electricity and district heat at the same time.
      The principle has been used for the construction of many co-generation projects with manufacturing industries. An industrial plant, which needs electricity, has joined forces with a municipally-owned energy company, for which it has supplied district heat.
     
The energy industries say that jointly-owned power plants generated 42 per cent of the electricity consumed in Finland in 2008.
      The paper emphasises that the Finnish Supreme Administrative Court ruled in the 1960s that the practice was lawful, as it was seen to be structurally equivalent to a cooperative venture. The court’s ruling was a split decision.
     
Finnish officials are expected to submit a report on the matter to the Commission’s competition department, which will investigate later if there is reason for further action.
      Jukka Leskelä, ET’s director of power generation, would not speculate on whether or not the MEPs’ action might lead to changes in procedure.
      “This is a complicated question of tax law, so let’s see what happens.”


Previously in HS International Edition:
  Government endorses two new nuclear reactors (22.4.2010)
  European Commission has questions about electricity sales in Finland (7.6.2010)

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