TEGOS represented SIA DJF in an administrative case concerning the annulment of the decision by the State Construction Control Bureau (hereinafter the Bureau), which annulled the mandatory procurement rights and imposed an obligation to repay state aid.
The essence of the dispute
The dispute in the case arose over whether the compliance of a cogeneration plant with the regulation should be assessed formally based on the location address of the equipment or on the actual technological process.
The Bureau considered that the company had committed a violation and changed the technological process, as part of the equipment necessary for the operation of the cogeneration plant (including the combustion plant and the heat energy meter) was located in an adjacent building with a different address. Meanwhile, the applicant indicated that the technological process in electricity and heat production is thus not affected.
Based on the Bureau’s decision, the company had to repay state aid received since the submission of the last annual report, although the infringement identified by the Bureau (change of equipment address) occurred significantly later.
Senate’s legal findings
The Senate provided significant insights in the case regarding the boundary of the cogeneration plant and the assessment of its compliance with the regulation of mandatory procurement rights. The Court emphasized that the decisive factor is not the formal location address of the equipment, but the actual technological process and whether the respective equipment functionally participates in the production of electricity and heat energy.
The Senate also analysed the criterion of useful heat energy use, pointing out that for retaining the mandatory purchase right, what matters is not the address where the equipment related to the plant’s operation is located, but whether the heat energy produced in cogeneration is actually delivered to economically justified heat supply demand. Contrary to the Bureau’s findings, the Senate clarified that in the context of useful heat energy metering, the decisive factor is not the metering device itself, but whether the specific cogeneration plant actually has installed and operates a measuring device that ensures the accounting of efficiently used thermal energy. The location of the measuring device can only be relevant to the extent that it affects the meter’s ability to correctly account for useful thermal energy.
The Senate’s finding on the limits of state aid recovery is particularly significant. The Senate emphasized that the repayment of state aid in the event of cancellation of mandatory purchase rights is not mechanically applicable for the entire period specified in regulatory enactments. When deciding on the recovery of aid, the company must first be given the opportunity to prove for which period the support was received legally and justifiably. If this can be ascertained to the degree of legal evidence credibility, there is no reason to require the repayment of aid also for the period during which it was received in accordance with the regulation.
Case outcome and significance
After re-examining the case, the administrative regional court fully satisfied the company’s application and declared the Bureau’s decision unlawful.
The judgment enshrines the principle that, in applying the mandatory procurement law regulation, priority should be given to factual and functional assessments rather than formal criteria.
Similarly, the Senate significantly restricted the formal approach to recovering state aid in the case, emphasising the application of the principle of proportionality and the need to individually assess to what extent and for what period the support was actually unjustifiably received.
The Senate’s judgment is attached to the case law of Latvian court practice.
The role of TEGOS team
TEGOS team, led by partner and head of the Energy practice group Agnese Hartpenga, represented the client in this complex and technically specific dispute for more than four years. The case required an in-depth examination of the operation of the cogeneration plant and the principles of ORC technology, in order to explain to the court the operation of a unified technological process in an understandable and convincing manner and to prove that the presence of individual devices in another building does not in itself affect the technology’s compliance with regulatory requirements. As a result, the unlawful decision was annulled and significant legal insights regarding the application of the mandatory procurement regulation and the limits on state aid recovery were enshrined.
