"A methodology for analysing State aid linked to stranded costs"* 1. The ‘stranded costs’ concept At the time the European electricity market was not liberalised, recovery of all investments by electricity undertakings was achieved through adequate tariff fixation by the States. In these circumstances, many of these undertakings invested in relatively costly electricity production plants or long term take or pay contracts. The decrease of electricity prices following the liberalisation of the sector may compromise the recovery of many of these investments or long term contract costs, and thus generate non recoverable costs. Such costs are generally known as ‘stranded costs’. Now, unlike other previous liberalisation processes, the liberalisation of the electricity sector does not take
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The EU Commission adopts a methodology for analyzing State aid linked to stranded costs that includes criteria for whether a stranded costs compensation mechanism that constitutes State aid can be authorized under the EC Treaty
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