II-5.16. On July 12, 2012, the Belgian Constitutional Court annulled a decree by which a region has fixed rates for injection into the electricity distribution network, because the federal power as that exercised by the regulator, is required

Context and Summary

To read the decision (in French), click here.

In its judgment of 12 July 2012, the Cour Constitutionnelle de Belgique (Belgium Constitutional Court) has lent a hand in Belgian Energy regulator, the Commission de Régulation de l’Electricité et du Gaz (CREG), the Belgian Regulatory Commission for Electricity and Gas. 

Belgium is politically and legally caracterized by the fact that the country is made up of regions, including the Flemish and the Walloon Regions, between which the political balance is difficult. The Constitutional Court, which follows the Cour d’Arbitrage (Court of Arbitration) since 2007, has kept it, the burden of ensuring that the regions do not appropriate skills that are not theirs, they include not exercising federal powers.

It is thus observed in an European country, an issue very familiar to a country like the United States, with very important implications of competence that implies in terms of economic regulation.

In the present case, the Flemish Region had adopted a series of decrees, the latest on December 23, 2010, to impose tariffs for injection of electricity into the distribution network.

The regulator has asked the Constitutional Court to annul the decree, in that the Region had exceeded its jurisdiction by adopting it. Before the Court, the Council of Minister and the Government have also produced submissions to support the regulator in its claim to uphold the theory of federalism.

In the casuistry of the debate, the Region argues that the decree in question did not specify in the strict sense of the term rates, but seeks to avoid the application of tariffs for electricity generated by renewable energy sources or quality cogeneration. Therefore, we would not be in the exercise of pricing, reserved to the federal power, but in another kind of power, which would remain at the regional level.

According to the Region, the measure adopted by decree is not a tariff, but a public service obligation imposed on the transmission system of electricity distribution to promote renewable energy production, which is within the regional jurisdiction

The regulator argued first that has an interest in contesting before the Court such a decree (legal interest in bringing), as being itself an organ of the federal level, the issue of jurisdiction, regional or federal, is concerned directly .

Then, on the merits, the Regulator says tarrifs, even those related to renewable energy sources or CHP, are within the federal power, according to the jurisprudence of the Constitutional Court itself (judgment of 31 May 2011) . Injection rates are an integral part of distribution rates, which the jurisdiction is federal.

The exception granted by the texts of the regional intervention in case of necessity can not be applied here, since acting in favor of a particular energy source is not a "necessity". In addition, the laws require that the action taken by the Region has a marginal impact, which is not the case at all.

The Council of Ministers adopts the same position than the Regulator and considers that the Region has violated the rules of federal organization : federal policy ot injection tarification rates does not lend itself to an approach different in different regions.

The Constitutional Court examines at length in its judgment the documents that led to the adoption of different texts in question, including one who assigns the power to price the federal bodies and the one who gives the power to adjust the energy policy to regions.

The Court concludes that the legislature intended the energy policy as a shared competence, in which the setting of tariffs continues to be under the jurisdiction of federal bodies.

The Court considers that the rates that distribution system operators may charge the counter to electricity producers are under federal competence, because these rates influence the price paid by the final customer.

Not surprisingly, the Court considers that neutralize a tariff, for any purpose whatsoever, is a measure of pricing, involving federal competence. The fact that the measure involves public service obligations borne by the distribution network manager does not remove the decree of its character as pricing, since the decree prohibits de facto manager to charge tariffs injection for some energy sources, which affects the price paid by consumers.

Therefore, in energy policy, it is part of the special pricing reserved for federal jurisdiction.

Brief commentary

The case is particularly important.
He began by emphasizing the importance and difficulty of pricing in all regulated sectors. The litigation continues to grow. Today, the constitutional courts get involved.

Second, it is essential to master the legal qualifications, in what should be the art of regulation. Indeed, the dispute around this issue politically and economically very important, was whether this decree constitutes an act of pricing or act of public service obligation borne of the network manager. In the first case, the competence is federal, in the second it is regional. Qualification, legal art par excellence, is therefore crucial.

Third, the complexity of a system often comes from federalism. It is measured well here, about Belgium and electric sector, but we know that the North American federal system has played a major role in the failure of banking regulation in the United States in the crisis that began in 2008.

Fourth, we find again the objective alliance, at least in Europe, between regulators and judges. Indeed, CREG issued a press release stating that the Constitutional Court had recognized in its judgment the jurisdiction of the regulator to regulate injection. It's make a shortcut. One should rather say that the regional jurisdiction is denied, and that federal competence is affirmed. The regulator is only part of a federal system. It does not summarize. One remains aware of when the Government and the regulator, which allies here, cease to be and compete, as is done in France about the pricing of natural gas.