BRUSSELS, May 27 -- An Italian scheme to compensate companies which agree to power cuts when grids are overloaded should not be considered state aid, European Union regulators said on Wednesday. The European Commission, the EU competition watchdog, said the three-year scheme in Sardinia and Sicily was necessary to ensure a continuous power supply on the two islands until the Italian network operator fixed structural network problems.
The Commission did not mention Alcoa (AA.N: Quote) in a statement but the decree was aimed at convincing the U.S. aluminium producer to keep its Italian plants working after it had threatened to suspend operations following the Commission's order to pay back state aid in Italy.
Aloca has said its plans for Italian operations depended on the Commission's approval of the decree and on achieving a competitive energy price for three years. Alcoa is yet to strike a three-year contract with its power supplier, Italy's biggest utility Enel (ENEI.MI: Quote).
"The scheme does not involve state aid in view of these specificities and because the remuneration of the service is established by public tender," Competition Commissioner Joaquin Almunia said in the statement.
The Italian network operator, Terna (TRN.MI: Quote) has said it would offer 500 MW of interruptible capacity in Sicily and Sardinia for three years while structural problems with electricity supplies to the islands are resolved.
These stem from insufficient power links with the mainland, large but obsolete power plants prone to outages and a big share of unpredictable wind-power generation, the statement said, citing Terna.
In November Alcoa said it would temporarily idle its 194,000 tonne-per-year smelters at Portovesme and Fusina in Italy after the Commission ordered it to pay back most of the state aid it had received in Italy since 2006. Alcoa has complained about high power prices in Italy.