1.

The present requests for a preliminary ruling concern the interpretation of Articles 107 and 191(2) TFEU, Article 9(1) of Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of water policy, ( 2 ) and Article 3(1) and (2) of Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC. ( 3 )

2.

The requests were made in proceedings between, on the one hand, several electricity generating companies holding concessions for the hydrological exploitation of inter-communities basins, i.e. basins located in more than one Comunidad autónoma (autonomous community) of Spain, and, on the other hand, the Administración General del Estado (General Administration of the State, Spain), supported by Iberdrola Generación SAU and Hidroeléctrica del Cantábrico SA, concerning the validity of a charge on the use of inland waters for electricity production in inter-communities river basins.

3.

These requests for preliminary references give the Court the opportunity to clarify the implication of the ‘polluter pays’ principle, the scope of Directive 2009/72 and the application of the prohibition of State aid in relation to a charge due to the use or exploitation of inland waters for the production of electricity. In addition, one of the key issues raised by this reference is whether the non-discrimination provisions of Article 3(1) of Directive 2009/72 can be said to apply to a taxation measure of this nature which had been adopted by the Kingdom of Spain in 2012. Yet before considering any of these issues it is necessary first to set out the relevant provisions of EU law and national law.

4.

Article 9(1) of Directive 2000/60, entitled ‘Recovery of costs for water services’ provides that:

‘Member States shall take account of the principle of recovery of the costs of water services, including environmental and resource costs, having regard to the economic analysis conducted according to Annex III, and in accordance in particular with the polluter pays principle.

Member States shall ensure by 2010

Member States may in so doing have regard to the social, environmental and economic effects of the recovery as well as the geographic and climatic conditions of the region or regions affected.’

5.

Article 3(1) of Directive 2009/72 states that:

‘Member States shall ensure, on the basis of their institutional organisation and with due regard to the principle of subsidiarity, that, without prejudice to paragraph 2, electricity undertakings are operated in accordance with the principles of this Directive with a view to achieving a competitive, secure and environmentally sustainable market in electricity, and shall not discriminate between those undertakings as regards either rights or obligations.’

6.

Article 149 of the Spanish Constitution, relating to matters of exclusive State jurisdiction, provides:

‘1.   The State shall have exclusive competence over the following matters:

...

14. General financial affairs and State Debt;

...

22. Legislation, regulation and concession of water resources and development where the waters pass through more than one autonomous community, and authorisation for hydro-electrical power plants whenever their operation affects other Communities or the lines of energy transportation are extended over other Communities;

....’

7.

Real Decreto 125/2007, de 2 de febrero, por el que se fija el ámbito territorial de las demarcaciones hidrográficas ( 4 ) (Royal Decree No 125/2007 of 2 February 2007 establishing the territorial scope of river basin districts) defines a river basin as the territory composed of one or more river neighbouring basins as well as the transitional waters, ground waters and coastal waters associated with them. Depending on the geographical location of the basin, there are two types of river basins in Spain: inter-communities basins for river basins located in more than one autonomous community and intra-community basins where the territory does not extend beyond an autonomous community.

8.

The preamble of Ley 15/2012, de 27 de diciembre, de medidas fiscales para la sostenibilidad energética ( 5 ) (Law No 15/2012 of 27 December 2012, on fiscal measures for the sustainable energy development, ‘the Energy Tax Law’), provides:

‘I.

The objective of this Law is to adapt our tax system to more efficient and environmentally friendly use and sustainable development, values that inspire this tax reform, and as such in line with the basic principles that govern the fiscal, energy and, of course, environmental policy of the European Union.

In today’s society, the increasing impact of energy production and consumption on environmental sustainability requires a normative and regulatory framework that guarantees all agents the proper functioning of the energy model that also contributes to preserving our rich environmental heritage.

The basic foundation of this Law is Article 45 of the Constitution, a provision in which the protection of our environment becomes one of the guiding principles of social and economic policies. Thus, one of the axes of this tax reform is to internalise the environmental costs resulting from electricity production … In this way, [this] Law must serve as a stimulus to improve our levels of energy efficiency while at the same time ensuring better management of natural resources and continuing to enhance the new model of sustainable development, both from an economic and social point of view, as well as from an environmental point of view.

...

To this end, this Act regulates three new taxes: the tax on the value of electricity production, the tax on the production of spent nuclear fuel and radioactive waste resulting from the generation of nuclear power, and the tax on the storage of spent nuclear fuel and radioactive waste in centralised facilities; [the] charge the use of inland waters for the production of electricity is introduced; the rates of taxation for natural gas and coal are amended and the exemptions for energy products used in the production of electricity and in the cogeneration of electricity and useful heat are abolished.

...

V.

Finally, Title IV of this law modifies the consolidated text of the Water Law approved by Royal Legislative Decree 1/2001, of 20 July.

In particular, this Title regulates the economic-financial regime for the use of the public water resources. Thus, it provides that the competent public administrations, by virtue of the principle of cost recovery and taking into account long-term economic projections, are to establish the appropriate mechanisms to pass on the costs of services related to water management, including environmental and resource costs, to the different end users.

…

In particular, Article 112 of the consolidated text of the Water Law establishes that the charge on use applies only to the occupation, use and exploitation of the public water resources defined in paragraphs (b) and (c) of Article 2 of the same law, i.e. to the use of natural, continuous or discontinuous streams and the beds of lakes and lagoons and those of surface reservoirs in public watercourses. Thus, the use of inland waters referred to in section (a) of the same Article 2 of the consolidated text of the Water Law is outside the definition of this charge.

This reality, which is an anomaly with respect to the general rules relating to assets in the public domain, has persisted for historical reasons, although today it lacks any economic rationale, at least in terms of a purely industrial use and in a market system such as that of electricity production.

At present, the general quality of Spanish inland waters makes their protection necessary in order to safeguard one of the natural resources necessary for society. In this regard, policies for the protection of public water must be enhanced. To this end, it is necessary to obtain resources that must be provided by those who obtain a benefit from their private use or use specifically for the production of electricity.

The purpose of this amendment, therefore, is to apply a new charge to the public assets described in Article 2(a) of the same law, that is to say, to the use or development of inland waters for hydroelectric exploitation.’

9.

Article 29 of Law No 15/2012 introduces in particular a new Article 112bis in the Real Decreto Legislativo 1/2001, de 20 de julio, por el que se aprueba el texto refundido de la Ley de Aguas ( 6 ) (Royal Legislative Decree No 1/2001, of 20 July 2001, approving the consolidated text of the Water Law).

10.

Law No 15/2012 also contains several provisions entitled ‘additional provisions’ which provide:

‘First additional provision. Events giving rise to tax liability regulated in this Law taxed by the autonomous communities.

1. To the extent that the taxes established by this Law are levied on events taxed by the autonomous communities and this results in a decrease in their income, the provisions of Article 6.2 of Organic Law 8/1980, of 22 September, on the financing of the autonomous communities shall apply.

2. The provisions of the previous section shall only be applicable in respect of those taxes specific to the autonomous communities established in a law approved prior to 28 September 2012.

Second additional provision. Electrical system costs.

Each year, the State’s general finance laws allocate to the financing of the costs of the electricity system provided for in Article 16 of Ley 54/1997, de 27 de noviembre, del Sector Eléctrico [Law No 54/1997 of 27 November 1997 on the electricity sector] an amount equivalent to the sum of:

(a) an estimate of the annual amounts collected by the State in respect of the levies and charges included in this Law;

(b) the estimated revenue generated by the auctioning of greenhouse gas emission allowances, with a maximum of EUR 500 million.’

11.

Article 2 of the Real Decreto Legislativo 1/2001, de 20 de julio, por el que se aprueba el texto refundido de la Ley de Aguas (Royal Decree No 1/2001 of 20 July 2001 approving the consolidated text of the Water Law), headed ‘Definition of public water resources’ states:

‘The public water resources of the State, with the exceptions expressly established in this Law, constitute:

…’

12.

According to Article 112 of Royal Legislative Decree No 1/2001, as amended by the Energy Tax Law, headed ‘Charge for the use of assets comprising public water resources’:

‘1.   The occupation, use and development of the assets in public water resources included in paragraphs (b) and (c) of Article 2 of the present Law, which require concession or administrative authorisation, shall yield in favour of the competent Basin Authority a tax called a charge on the use of public water resources, intended for the protection and improvement of the abovementioned resources. Water concession-holders shall be exempted from payment of the charge for the occupation or use of public land necessary to operate the concession.

...

4.   The taxable base of the charge shall be determined by the Basin Authority according to the following assumptions:

...’

13.

Article 112bis of Royal Legislative Decree 1/2001, headed ‘Charge for the use of inland waters for the production of electricity’, as introduced by Law No 15/2012, stipulates: According to Article 112 of Royal Legislative Decree No 1/2001, headed ‘Fee for the use of goods in the public water domain’:

‘1.   The use and exploitation of the public assets referred to in paragraph (a) of Article 2 of this law, for the production of electric power in power station busbars, shall be subject to a tax known as a charge for the use of inland waters for the production of electric power, intended for the protection and improvement of the public water resources.

2.   The charge will become due on the initial granting and annual maintenance of the hydroelectric concession and will be payable in the corresponding amount and within the periods indicated in the conditions of said concession or authorisation.

3.   Those liable to pay the charge shall be the concession-holders or, as the case may be, those who are subrogated to them.

4.   The taxable base of the charge shall be determined by the Basin Authority and shall be the economic value of the hydroelectric energy produced, measured according to the plant’s busbar costs, in each annual tax period by the concession-holder through the use and exploitation of public water resources.

5.   The annual tax rate shall be 22 per cent of the value of the tax base and the total tax liability shall be the amount resulting from applying the tax rate to the tax base.

...

8.   The management and collection of the charge shall be the responsibility of the competent Basin Authority or of the State Tax Authority, by virtue of an agreement with the latter.

…’

14.

The preamble of Real Decreto 198/2015, de 23 de marzo, por el que se desarrolla el artículo 112bis del texto refundido de la Ley de Aguas y se regula el canon por utilización de las aguas continentales para la producción de energía eléctrica en las demarcaciones intercomunitarias ( 7 ) (Royal Decree No 198/2015 of 23 March 2015 implementing Article 112bis of the consolidated text of the Water Law and regulating the charge on the use of inland waters for the production of electricity in inter-communities basin districts) stated:

‘... This royal decree is issued under the second and third final provisions of Law 15/2012, of 27 December. On the one hand, the second final provision establishes Article 149.1.22.a of the Spanish Constitution as the legal basis for the powers exercised, which attributes to the State powers over legislation, regulation, and concession of water resources and uses when they pass through more than one autonomous community. On the other hand, the third final provision enables the Government, within the scope of its powers, to issue the necessary regulatory provisions for the development and application of this law …’

15.

Article 1 of Royal Decree No 198/2015, headed ‘Charge for the use of inland waters for the production of electricity and scope’, provides:

‘The use and exploitation of assets of public water resources referred to in article 2(a) of the revised text of the Water Law for the production of electricity, measured according to the plant’s busbar costs, will be subject to a tax known as a charge for the use of inland waters for the production of electricity, intended to protect and improve public water resources.

This charge shall apply only in inter-communities basins.’

16.

Article 12 of Royal Decree No 198/2015, headed ‘Revenue of the charges collected’, states:

‘1.   The amount of the collected revenue will be paid to the basin authority by virtue of the provisions of Article 112bis of the consolidated text of the Water Law, approved by Royal Legislative Decree 1/2001, of 20 July. For these purposes, the provisions of Articles 59(d), 63.3 and 67 of Royal Decree 927/1988, of 29 July, which approves the regulations of the Public Water Authority, shall be taken into account.

...

3.   2% of the net revenue collected shall be considered as revenue of the basin organisation.

4.   Of the amount of the net revenue collected, 98% shall be paid to the Treasury. The General State Budgets shall allocate at least an amount equal to the amount provided for to actions for the protection and improvement of public water resources, in accordance with the provisions of Article 14. To this end, the investment projects that guarantee the protection and improvement of public water resources will be determined annually in the General State Budget Laws.

…’

17.

According to Article 13 of that law, headed ‘Guarantee of protection of public resources’:

‘In order to ensure compliance with the environmental objectives established in the Water Framework Directive and provided for in Article 98 and subsequent articles of the consolidated text of the Water Law, and in accordance with the principle of cost recovery established in Article 111bis of the consolidated text of the Water Law, the General State Budgets shall allocate at least an amount equal to the amount provided for in section 4 of the previous Article 12, in accordance with that defined in Article 14, to actions for the protection and improvement of public water resources and the bodies of water affected by hydroelectric developments.’

18.

The applicants in the main proceedings brought an administrative law action before the Tribunal Supremo (Supreme Court, Spain) in which they sought the annulment of Royal Decree No 198/2015 implementing Article 112bis of the recast text of the Water Act. In their application, the applicants contest the validity of Article 29 of Law No 15/2012 which introduces Article 112bis in Royal Legislative Decree 1/2001.

19.

The referring court has doubts about the compatibility of these legislative measures with, first, the ‘polluter pays’ principle enshrined in Article 191(2) TFEU, as given expression by Directive 2000/60, second, with the principle of non-discrimination enshrined in Article 3 of Directive 2009/72 and, third, with the prohibition of State aid laid down in Article 107 TFEU. ( 8 )

20.

Regarding the conformity of such tax with the ‘polluter pays’ principle, the referring court points out that, despite the fact that the recital of the Energy Tax Law justifies this tax on environmental grounds, namely the protection and improvement of public water resources, the very structure of this tax seems to indicate that it actually pursues a purely economic objective which is to cover the financial deficit of the electricity grid. Moreover, it seems that, according to the referring court, this objective is pursed in an incoherent and inconsistent way. First, this tax is based on the value of the energy produced, which is calculated on the basis of the income generated by the energy injected into the electricity grid and not according to the quantity of water used. Second, the rate of this tax is 22%, whereas the rate for the occupation, use and exploitation of other natural watercourses is only 5%. Third, 98% of the sums collected are paid into the general budget of the Spanish State and would therefore constitute additional revenue for the electricity system. If the text of the Royal Decree specifies that the General State budget allocates an amount at least equal to 98% of the revenues obtained by that charge to measures to protect and improve public water resources, the referring court states that such allocation was not respected in the general State budget for 2016, which allocated all revenues generated by this tax to the deficit of the electricity system. Thus, contrary to the requirements of Article 9(1) of Directive 2000/60, the tax would not take into account the principle of recovery of the costs of water services.

21.

As regards the compatibility of the tax with the principle of non-discrimination enshrined in Article 3 of Directive 2009/72, the referring court underlines that the tax for the use of inland waters only applies to hydroelectric power producers, excluding the power producers using a different technology. In addition, it is only imposed on producers who hold administrative concessions in inter-communities and not intra-community river basins.

22.

In respect of State aid, the referring court stresses that, because of the asymmetrical nature of that tax, the differences in treatment which it imposes could constitute State aid in favor of those who are not subject to this tax.

23.

In that context, the Tribunal Supremo (Supreme Court) has decided in cases C‑105/18 to C‑108/18 and C‑110/18 to C‑113/18 to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

24.

In Case C‑109/18, the first two questions referred for a preliminary ruling are, in substance, identical to the first two questions in the cases referred to in the previous paragraph. However, the third question is worded as follows:

25.

Written observations were submitted by Asociación Española de la Industria Eléctrica (UNESA), Corporación Acciona Hidráulica (Acciona) SLU, Associació de Productors i Usuaris d’Energia Elèctrica, Endesa Generación SA, Asociación de Empresas de Energías Renovables (APPA), Iberdrola Generación SAU, the Spanish and the German Governments and by the European Commission. In addition, with the exception of the German Government, they all presented oral arguments at the hearing on 28 February 2018.

26.

By its first question, the referring court is asking whether the ‘polluter pays’ environmental principle, provided for in Article 191(2) TFEU, and Article 9(1) of Directive 2000/60, which lays down the principle of the recovery of costs for water services and for appropriate economic balancing of water uses, should be interpreted as precluding the introduction of a tax on the use of inland waters to produce energy, such as the tax at issue in the proceedings.

27.

Before assessing whether one of these two provisions precludes such a tax, it is necessary to determine whether one of them can be invoked before a national court.

28.

Regarding Article 191(2) TFEU, as the Court already held, since this provision, which establishes the ‘polluter pays’ principle, is directed at action at EU level, individuals cannot rely on it in order to exclude the application of national legislation. ( 9 )

29.

It is true that such individuals can invoke a provision that gives effect to this principle in a particular field, provided that this provision in turn can properly be regarded as directly effective. ( 10 ) However, even if Article 9(1) of Directive 2000/60 gives concrete form of the ‘polluter pays’ principle in the field of water management, this provision cannot be directly invoked before a national court as, for reasons I will shortly set out, I do not consider that this provision is directly effective. Indeed, if Article 9(1) of Directive 2000/60 does require, in all circumstances, that Member States take into account the principle of recovery of the costs of water services, including environmental and resource costs, in accordance, in particular, with the polluter-pays principle, ( 11 ) this obligation does not have the effect of granting them with a specific protection or a right.

30.

This is borne out by the very language of Article 9(1) itself which lacks the qualities of clarity, precision and unconditionality necessary for any doctrine of direct effect to come into play. The first part of Article 9(1) thus merely states that Member States ‘shall take account’ of the principle of costs recovery for water services, without specifying precisely how this is to be done.

31.

It is true that the second part imposes specific obligations on Member States to achieve certain targets by 2010. Again, however, the language employed even in this context (‘… Member States shall ensure that by 2010 that water-pricing policies provide adequate incentives for users to use water resources efficiently …’) does not admit of the precision necessary for the purposes of the direct effect doctrine. ( 12 ) How, one might ask, could a national court gauge by reference to conventional legal principles in a case brought by an individual applicant in respect of a particular tax whether ‘adequate’ incentives for users to use water resources ‘efficiently’ had been put in place by a Member State?

32.

Compliance with the obligation provided for in Article 9(1) can only be assessed by taking into account all the rules governing the formation of water prices. Indeed, Article 9(1) does not state that each tax or charge on water shall be paid in proportion to the use of water, but rather that Member States must ensure that in general their water-pricing policies provide adequate incentives. In order to assess whether a Member State has complied with this article, all the taxes or charges borne by water users have to be taken into consideration and not only the one at stake in a particular situation.

33.

Accordingly, I propose to answer the first question by saying that neither Article 191(2) TFEU nor Article 9(1) have direct effect and, therefore, that neither provision may be invoked before a national court by an individual in order to challenge a particular tax on the use of inland waters to produce energy.

34.

By its second question, the referring court asks if a tax such as the one at issue in the main proceedings which affects undertakings holding a concession for the use of the inter-communities basin for the production of electricity, but not operators holding concessions on intra-community basins, nor electricity producers using other technologies, is compatible with the principle of non-discrimination between operators provided for in Article 3(1) of Directive 2009/72.

35.

As I explained in my opinion delivered in Joined Cases C‑80/18 to C‑83/18 UNESA and Others v Administración General del Estado, which has also been delivered this morning, I believe that the scope of the application of Directive 2009/72 is limited to the generation, transmission, distribution and supply of electricity, the generality of the language of the provision notwithstanding. This flows from the fact that, first, the concept of ‘generation’ is to be understood, as it can be inferred from Articles 7 and 8 of Directive 2009/72, as only referring to the construction of new electricity generating capacity and, second, the directive was adopted on the sole basis of Article 95 EC (now Article 114 TFEU) whose second paragraph provides that this article cannot be used for the adoption of EU tax measures.

36.

The tax harmonisation issue is, moreover, of some considerable importance. Indeed, according to the Court’s case-law the general principle of non-discrimination (in the special sense and meaning of that term in EU law) only applies in the scope of application of the EU law. ( 13 ) Accordingly, if the directive is to be understood as making this principle applicable to taxes imposed on the electricity market, then it must be regarded as a harmonisation measure.

37.

Here, it must be observed that, as the Union does not have jurisdiction under Article 114 TFEU to adopt such a tax measure, if Article 3(1) were to apply to a national taxation measure, this Article would, by definition, be unlawful. It is consequently necessary to give the provision a more restrictive interpretation than perhaps the generality of its language might otherwise suggest. The directive must therefore be considered as not having the effect of making the EU principle of non-discrimination applicable to national taxation measures. Any other conclusion would have required, in my view, that the directive should have had Article 115 TFEU as its legal basis and, therefore, would have had to have been adopted by the Council acting unanimously.

38.

In these circumstances, I find myself obliged to conclude that national taxation measure falls outside the scope of Directive 2009/72.

39.

In the event, however, that the Court does not share that interpretation and concludes that Article 3(1) is in fact applicable to taxes, I nonetheless propose to examine in the alternative whether that provision must be interpreted as precluding a tax such as the one at issue in the main proceedings. The remainder of this Opinion proceeds, accordingly, on the assumption — contrary to my own view — that Article 3(1) of Directive 2009/72 does in fact apply to tax measures of this kind.

40.

In this regard, it must be recalled that in the context of the requests for preliminary ruling, the Court has no jurisdiction either to apply the Treaties or an EU act to a specific case or to decide upon the validity or the interpretation of a provision of national law, as it would be possible for it to do under Article 258 TFEU. It is ultimately for the national court, which has sole jurisdiction to determine the facts in the case before it and to interpret the national legislation, to rule on the validity of the contested national measure. However, in preliminary ruling proceedings, the Court, which is called on to provide answers of use to the national court, may provide guidance based on the documents in the file and on the written and oral observations submitted to it, in order to enable the national court to give judgment. ( 14 )

41.

As the Court has already held in relation to a previous directive concerning common rules for the internal market in electricity, ( 15 ) the provisions referring to the principle of non-discrimination in that directive, ‘are specific expressions of the general principle of equality’. ( 16 ) Therefore, in principle, the case-law of the Court relating to the general principle of equality should be considered as being relevant for the interpretation of Article 3(1).

42.

According to the principle of equal treatment, comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified. ( 17 )

43.

In accordance with settled case-law of the Court, the factors which distinguish different situations, and the question whether those situations are comparable, must be determined and assessed under EU law, in principle, in the light of the subject matter of the legislation establishing the alleged discrimination and of the aim pursued. ( 18 )

44.

In a situation, however, where the general principle of equal treatment is not at issue, but a provision giving substance to this principle is, then the question of whether the comparability of two situations should not be assessed in the light of the objective pursued by that provision but instead rather by reference to the substantive objects and effects of the national legislation in question.

45.

In my opinion, the answer to this question depends on how the principle of equal treatment is referred to in the provision giving this principle its substance. If the latter expressly provides that two categories of persons must be treated identically, national courts have to consider that their situations are comparable. ( 19 ) If, however, EU law merely states that Member States must not discriminate among a certain category of persons, those Member States are obliged not to treat all persons as being in the same situation, but should rather ensure that, in the exercise of their normative competence, they do not create any arbitrary distinction and, moreover, that the substance of equality of treatment is preserved. ( 20 )

46.

In the present case, since Article 3(1) does not provide that all producers of electricity must be treated identically, but rather that ‘Member States … shall not discriminate between [electricity] undertakings as regards either rights or obligations’, the comparability of the situations should really be determined in the light of the subject matter of the national legislation and of the aim pursued.

47.

The preamble of Law No 15/2012 mentions that the tax on the use of inland waters for the production of electricity pursues two objectives, namely:

48.

Regarding this first objective, since both the taxable base and the rate of the tax laid down in Article 112 of the Water Law are different from those referred to in Article 112bis thereof, quite obviously the first objective referred to in the preamble of that law cannot be considered as one which is really pursued by that article. Accordingly, this objective should not be taken into account to determine the comparability of the situations at issue.

49.

Concerning the second objective, in the light of the latter objective, all public water users are to be considered as being in the same situation. Indeed, although the preamble of Law No 15/2012 states that the scope of application of the tax is limited to the production of electricity, the particular objective which this tax is pursuing, i.e., to strengthen the protection of public waters by passing on the cost of services related to water management to the end user, actually concerns all users of inland waters.

50.

The referring court raises serious doubts concerning whether this declared legislative objective is indeed a genuine one. It suggests that the purpose of the tax on the use of inland waters for the production of electricity could be exclusively to increase the volume of revenues in the financial system of the electricity sector in order to offset the tariff deficit resulting from the difference between the revenues that Spanish electricity companies receive from consumers and the costs of electricity supply recognised by national regulations, the reimbursement of which is guaranteed by the Spanish State. It takes this view for the following reasons:

51.

The applicants have also expressed concerns regarding the genuine nature of that objective since the application of this tax has the effect that hydroelectricity is being taxed twice as much as other sources of electricity, including those sources which are considered to be more polluting.

52.

There seems little doubt but that the primary purpose of that tax is to raise the volume of public revenue generated by the electricity sector. One may, however, accept that the production of hydroelectricity presents particular issues regarding the use of national resources which may justify a somewhat different treatment of that sector for taxation purposes.

53.

After all, the more specific purpose of the tax on inland waters is not to protect the environment in general, but rather to strengthen the protection of public waters and to pass on the cost of services related to water management to the different end users. ( 21 ) Therefore, the fact that the rate of this tax is higher than the one applicable to the use of other natural watercourses does not necessarily contradict the objective pursued by the national legislation, namely, to pass on to consumers the cost of water services, since not all users of water have the same impact on the latter. ( 22 )

54.

As for the second circumstance put forward by the referring court, although the choice of this particular basis for the tax may seem unusual, it should be recalled that the production of electricity by means of hydroelectric technologies implies a certain relationship between the water used and the quantity of electricity produced. Indeed, this quantity is determined by the volume of water flow and the height from the turbines in the power plant to the water surface created by the dam. ( 23 ) Therefore, the fact that a tax is based on the amount of electricity produced ‐ and not the water consumed ‐ does not appear, as such, to be contrary to the objective of passing on the costs of water management services to end users.

55.

Regarding the third circumstance mentioned by the referring court, namely, the contention that 98% of the revenues obtained by the tax on inland waters were not allocated to protect and improve public water resources in the 2016 budget, ( 24 ) it is true that the objectives pursued by the tax to strengthen the protection of public waters and to pass on the cost of services related to water management to the different end users suggests that at least part of the sums collected, corresponding to the costs of water use, is allocated to maintaining and improving installations. ( 25 )

56.

However, the absence of allocation of the revenues generated by the tax on the use of inland waters in that way in 2016 is not in itself sufficient to demonstrate that the tax does not pursue such an objective. Indeed, even if such circumstances were established, as long as the latter remains confined to a specific year, it is not possible to determine whether the stated objective is not a genuine one or whether the problem is confined to the 2016 budget.

57.

So far as the applicants’ argument that hydroelectricity faces end taxes which are appreciably higher than electricity produced by other methods, including those generally considered as being more polluting for the environment, it is true that such a circumstance, if accurate, calls into question the Spanish environmental protection policy. However, it should be recalled, again, that the objective pursued by the tax at issue is not to protect the environment in general but to strengthen the protection of public waters and to pass on the cost of services related to water management to the different end users. It is not contrary to this objective that the tax rate is higher for hydroelectricity than for electricity produced by other methods.

58.

It follows that it is not obvious from the arguments put forward by the referring court and the applicants that the second objective mentioned in the preamble of the law is not a genuine legislative objective. It is, however, for the referring court to assess if the purpose of the law at issue in the main proceedings is genuinely related to the objective of strengthening the protection of public waters and to pass on the cost of services related to water management to the different end users.

59.

If one adheres to the objective set out in the national legislation, then all inland water users are to be considered as being in the same situation for the purpose of determining whether there is a difference in treatment. By introducing a tax that covers only the use of waters for electricity production, this legislation accordingly creates a difference of treatment between the latter and the other inland waters users.

60.

If the doubts expressed by the referring court about the objectives pursued by national legislation were to be confirmed, the legislation would also introduce a difference in treatment, but the latter would not be between those who use water to produce electricity and those who use it for other purposes, but rather between hydroelectricity producers and other electricity producers. Indeed, if the purpose of the tax on the use of inland waters is to increase the volume of revenues in the financial system of the electricity sector, all energy producers would then have to be considered as being in a comparable situation, since the deficit is due to the difference between the revenues that Spanish electricity companies receive from consumers and the costs of electricity supply recognised by national regulations.

61.

Where there is a difference in treatment between two otherwise comparable situations, the principle of equal treatment is not infringed in so far as that difference is duly justified. ( 26 ) That is the case, according to settled case-law of the Court, where the difference in treatment is justified by an objective reason, where the difference in treatment is proportionate to this reason and if this reason is taken into account by the national legislature in a consistent manner. ( 27 )

62.

In the present case, the national court and the parties refer to three possible justifications, namely:

63.

Regarding the protection of the natural resource, since the impact of hydroelectric power generation on the inland waters involves the use of public environmental resources which Spain wishes to conserve, such an objective could justify a difference in treatment between the hydroelectric power producers and the other public waters users, ( 28 ) provided that such difference is effectively related and proportional to the specific impact those techniques have on the environment, and that this reason is taken into account in a consistent manner. Even if these are matters essentially for the referring court to verify and to assess, I do not, however, see how such an objective could justify hydroelectric power producers being treated differently depending on whether or not the concession that they hold concerns an intra-community or inter-communities basin of the various regional autonomous communities in Spain. It follows, therefore, that this particular explanation cannot justify the difference in the treatment described earlier.

64.

The same reasoning applies to the need to ensure a broadly comparable level of taxation between electricity producers. Indeed, although that objective could be considered as legitimate, the pursuit of this objective could only be regarded as consistent and proportionate if the amount of tax already borne by each electricity producer is taken into consideration, directly or indirectly, in order to determine the tax due under Article 112bis, which does not seem to be the case. Indeed, it does not appear that the calculation of the tax due under Article 112bis is, one way or another, related to the amount of taxes already paid by the electricity producers, although again this is a matter for the referring court to assess and verify.

65.

During the hearing, the Spanish Government argued that this difference would be explained by the difference of flow between watercourses depending on whether or not they pass through more than one autonomous community. I cannot help thinking, however, that such an explanation is not very convincing. Besides the flow of a watercourse depends on factors other than its length, no provision in the preamble of Royal Decree No 198/2015, which has created this distinction, refers to such justification.

66.

Finally, concerning the division of competences between the State and the autonomous communities in Spain, if such objective must be considered as constituting an objective reason, the parties in the main proceedings disagree on whether or not the Spanish Constitution actually reserves the competence to adopt a tax or to decide on the amount of the charge to be paid for the use of intra-community basins to each autonomous community. ( 29 ) The applicants claim that the State has general jurisdiction in tax matters under Article 149(2)(14) of the Constitution, whereas the Spanish Government alleges that it can be inferred from an a contrario reading of Article 149(1)(22) of the Constitution that the State has no jurisdiction to establish a tax or a charge ( 30 ) for the private use of inland waters flowing into the territory of a single autonomous community.

67.

In this respect, I note that, first, it cannot be inferred, from a logical point of view, from the exclusive nature of the competence held by the State to organise and grant only concessions relating to inter-communities basins that that State has no competence to tax electricity produced from intra-community basins, as such competence could be exercised jointly. Second, it seems from the reading of the ‘first additional provision’ contained in Law No 15/2012 that initially the national legislature considered that it had jurisdiction to encroach on the tax powers of the autonomous communities.

68.

It must, however, be recalled that when the Court is requested to give a preliminary ruling, its task is to provide the national court with guidance on the scope of the rules of Union law so as to enable that court to apply the rules correctly to the facts in the case before it, and it is not for the Court of Justice to apply those rules itself, a fortiori because it does not necessarily have all the essential information available to do so. ( 31 ) It is for the referring court, therefore, to assert whether or not the Spanish Constitution must be interpreted as meaning that the State was not entitled to apply the tax in question to intra-community basins.

69.

If the doubts expressed by the referring court regarding the sincerity of the objective pursued by the national legislation were to be confirmed, then, while allowing for the fact that the production of hydroelectricity presents different issues than in the case of other forms of electricity production because of the use of natural resources which are thereby entailed, this, nevertheless, will not obscure the fact that a palpably unequal treatment for tax purposes of different types of electricity producers is likely to engages the principle of equality and non-discrimination in a fundamental way. There will therefore be no doubt at all that different tax treatment of this kind of producers of different types of electricity should be objectively justified. This may be so given the strikingly high difference in tax treatment of hydroelectric producers as compared with other electricity producers. ( 32 )

70.

Summing up on this issue, therefore, since I believe that Article 3(1) does not apply to national taxation measures, I would propose that the Court should answer the second question by saying that the principle of non-discrimination between operators provided for in Article 3(1) of Directive 2009/72 is not applicable to a tax such as the one at issue in the main proceedings which affects undertakings holding a concession for the use of inter-communities basins for the production of electricity, but not operators holding a concession on intra-community basins to produce electricity, nor electricity producers using other technologies.

71.

In the event that the Court were not to share my view regarding the scope of Article 3(1) of Directive 2009/72, then I would answer the question in the alternative by saying that this provision must be interpreted as not precluding in principle national legislation such as the taxation measures at issue in the main proceedings provided, however, that the different tax treatment of the different electricity producers is capable of objective justification in the manner I have just described. It is, however, for the referring court to assess if the purpose invoked by the law in the main proceedings is genuinely based on well-founded concerns arising from the use of public resources and, specifically, whether the strikingly different treatment for tax purposes of the different types of electricity producers is capable of objective justification.

72.

By its third question, the referring court asks in essence whether or not Article 107(1) TFEU should be interpreted as meaning that the non-applicability of a tax on the use of inland waters to undertakings holding a concession on intra-community basins to produce electric power constitutes prohibited State aid.

73.

According to the settled case-law of the Court, the qualification of a national measure as ‘State aid’, within the meaning of Article 107(1) TFEU, requires all the following conditions to be cumulatively fulfilled:

74.

Given the nature of the Spanish taxation measures, it is clear that these conditions can be considered as having been fulfilled. I reach that conclusion for the following reasons.

75.

First, the Court already held that a measure by which a public authority granted to certain undertakings a specific tax treatment which, although not involving the transfer of State resources, places them in a more favourable financial position than other taxpayers, constitutes an intervention from the responding State. ( 34 )

76.

Second, a measure is likely to affect trade between Member States as soon as such trade, even hypothetical, exists in the economic activity concerned. In particular, the Court has already stated that when the aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-EU trade, the latter must be regarded as affected by that aid. It is, therefore, not necessary that the beneficiary undertakings are themselves involved in intra-EU trade. Each time where a Member State grants aid to undertakings, internal activity may be maintained or increased as a result, so that the opportunities for undertakings established in other Member States to penetrate the market in that Member State are thereby reduced. ( 35 ) In practice, therefore, this means that, except in case of special circumstances, it is only when national markets are not open to competition and the recipients act exclusively within this framework that a measure can be considered not to affect intra-EU trade. ( 36 )

77.

Third, it flows from the case-law of the Court that, in principle, measures intended to release an undertaking from costs which it would normally bear in its day-to-day management or normal activities, distorts the conditions of competition. ( 37 ) This condition does not require that it be established that such aid has a real effect on trade between Member States and that competition is actually being distorted, but only to examine whether that aid is liable to affect such trade and distort competition. Accordingly national measures intended to relieve an undertaking of the expenses which it would normally have had to bear in its day-to-day management or its usual activities provides that undertaking with artificial financial support which, in principle, distorts competition in the sectors in which it is granted. ( 38 )

78.

In the present case the measure in question, which consists in the non-taxability of electricity produced otherwise than by using water from an inter-communities basin, constitutes a specific tax treatment which places the producers of electricity produced in this fashion in a more favourable financial position. This in turn is likely to affect trade between Member States as the electricity market is open to competition and, moreover, releases these producers from a tax charge which they would otherwise have to bear. The first three conditions must accordingly be considered as having been satisfied.

79.

According to the case-law of the Court, advantages resulting from a general measure applicable without distinction to all economic operators do not constitute State aid within the meaning of Article 107 TFEU. ( 39 ) Therefore, in order to classify a tax as conferring a selective advantage, a three-step test must be carried out. This test was recently reaffirmed by the Court in A-Brauerei, in the following terms: ( 40 )

80.

Regarding the material delimitation of the reference framework, the Court held, in paragraph 37 of the judgment of 19 December 2018, A-Brauerei (C‑374/17, EU:C:2018:1024), that this must be determined in the light not of the objective pursued by the measure at issue but rather in view of the subject matter covered by the tax from which the measure in question constitutes a derogation. ( 42 ) In addition, all the rules dealing with that subject matter, and not only the tax from which the measure at issue derogates, must be taken into consideration. ( 43 )

81.

In the present case, although the tax on the use of inland waters has the objective of strengthening the protection of public waters and to impose the cost of water management services on final consumers, this does not take away from the fact that the subject matter of the potential State aid is nonetheless the taxation rules on electricity. ( 44 ) It is, indeed, the amount of electricity produced that constitutes its tax base and it is in electricity production market that its impact on the competition will be felt. ( 45 ) Accordingly, the reference framework is constituted, from a material point of view, by all national tax provisions related to electricity production.

82.

Regarding the territorial delimitation of the reference framework, the Court held in ANGED that ‘for the purpose of assessing the selectivity of a measure [,that framework] must not necessarily be determined within the territory of the Member State concerned, but may be that of the territory within which a regional or local authority exercises the powers conferred on it by the constitution or by law. Such is the case when that entity enjoys a legal and factual status which makes it sufficiently autonomous in relation to the central government of a Member State, with the result that, by the measures it adopts, it is that body and not the central government which plays a fundamental role in the definition of the political and economic environment in which undertakings operate.’ ( 46 )

83.

For my part, however, I consider that the national division of competences is only relevant to determine the reference framework in the situation where the measure which could constitute a public aid was adopted by a regional or local authority and not, as in the present case, where that measure was in fact adopted by the State, but where the latter is, so to speak, hiding behind its rules on division of competences in order to justify having limited the territorial scope of application of that measure. In such a situation, the division of competences must be examined as a justification, but not as an element for defining the territorial delimitation of the reference framework.

84.

Here, since the measure which, according to the national court, could constitute State aid is the non-taxability by the Spanish State of hydroelectric electricity produced otherwise than by using the water of an inter-communities basin, the territorial delimitation of the reference framework is constituted by the entire territory of the Kingdom of Spain.

85.

It therefore follows that the reference framework consists, from a material point of view, of all the rules relating to electricity taxation and that, from a territorial point of view, this framework concerns the entire Spanish territory.

86.

The next element of the test is an examination of whether a tax is such as to favour ‘certain undertakings or the production of certain goods’ over other undertakings active on the same market is to be done in the light of the objective pursued by the reference framework. ( 47 ) This test is not always the easiest to apply since the vast majority of taxes do not have objectives other than replenishing the State budget.

87.

It is clear from a review of the recent case-law that it is only, however, when the reference framework is pursuing a specific objective that the Court uses the latter to determine the existence of a selective exemption or other similar differential tax treatment or derogation from the general tax law. ( 48 ) Where the taxation measures do not pursue any objective other than to finance the State budget, the Court, although sometime using the term ‘objective’, determines that framework by reference to its subject matter. ( 49 )

88.

Accordingly, I believe that the second step of the test consists simply in inferring the existence of a selective exemption or derogation from the fact that the tax measure at issue covers only part of the goods or services falling within the scope of application of the reference tax system.

89.

In the main proceedings, it is quite obvious that, in the light of the taxes applicable to the production of electricity, the national legislation creates a distinction between the electricity produced by hydroelectric power using an inter-communities basin and electricity produced by other means or using an intra-community basin.

90.

As it happens, however, the referring court did not provide any information on the taxes governing the production of electricity according to these other means or using intra-community basins, in particular those applied in Spain by the autonomous communities, where, as I explained previously, in order to assess whether a particular tax exemption is selective, a holistic view of the overall applicable tax rules needs to be taken. As the Court held in, Portugal v Commission, ( 50 )‘the “normal” tax rate is the rate in force in the geographical area constituting the reference framework’. In A-Brauerei, the Court likewise stated that ‘… in order to classify a national tax measure as “selective”, [it is necessary to] demonstrate that the tax measure at issue is a derogation from that ordinary system …’. ( 51 )

91.

In these circumstances and absent this critical information allowing a holistic assessment to be adopted, the Court is simply not in a position to assess itself whether producers using other techniques or water from an intra-community basin are at an advantage over the one using water from an inter-communities basin. Although it seems implicit in the order for reference that intra-community basin producers do in fact enjoy a significant tax advantage over inter-communities basin producers, this will ultimately be a matter for the national court to assess and verify.

92.

Moreover, I am not entirely convinced that the concept of State aid may apply in a situation such as the one at issue in the main proceedings. Indeed, in that situation, the alleged advantage is held by all electricity producers except those subject to taxes, which means that it is constituted by the reference framework itself. To put it another way, what is selective in such circumstance is not the advantage, but rather the disadvantage. ( 52 )

93.

If, however, the Court were to consider that the concept of State aid could apply in such a situation, it should be taken into account that, as it appears from the first additional provision of Law No 15/2012, the tax on inland waters use was, at first, intended to be applicable to all basins, both inter-communities and intra-community. It seems that it was only with the adoption of Article 1 of Decree 198/2015 that the application of that tax was limited to inter-communities basins.

94.

If this is correct, Article 1 can be seen as a measure granting a derogation from the reference framework constituted by the Law No 15/2012 introducing, in Article 112bis of the Royal Legislative Decree 1/2001, a tax on the use of inland waters and that such derogation must be considered as selective in the A-Brauerei sense of that since its application is subject to conditions of application. It is, accordingly, necessary to examine the potential justifications that might be adopted in respect of this taxation measure.

95.

According to the settled case-law of the Court, the concept of ‘State aid’ does not cover measures that differentiate between undertakings which, in the light of the objective pursued by the legal regime concerned, are in a comparable factual and legal situation and are, therefore, a priori selective, where the Member State concerned is able to demonstrate that that differentiation is justified since it flows from the nature or general structure of the system of which the measures form part. ( 53 )

96.

In this regard, and also according to case-law, a distinction must be made between, on the one hand, the objectives attributed to a particular tax scheme and which are extrinsic to it and, on the other hand, the mechanisms inherent in the tax system itself, which are necessary for the achievement of those objectives. In essence, therefore, only the objective inherent in the tax system itself could justify a selective tax measure. ( 54 )

97.

In the present case, the parties have not, however, submitted any evidence to establish that the nature or general structure of the rules on the taxation of electricity as such requires that intra-community and inter-communities basins are treated differently

98.

It should be stressed that the case-law mentioned above concerns the justification for the selective nature of a tax measure. The absence of justification in this respect is therefore without prejudice to the possibility for Member States, once it has been established that the four conditions mentioned in Article 107(2) and (3) TFEU for a measure to qualify as State aid are met, to justify its adoption. Indeed, it is clear from the very wording of paragraphs 2 and 3 of Article 107 TFEU that certain aid adopted by Member States may, under certain conditions, be justified.

99.

Among the justifications already accepted by the Court is the protection of the environment. ( 55 ) It is true that such an objective cannot justify the difference in the treatment of hydroelectric producers depending on whether they hold a concession on an intra-community or an inter-communities basin.

100.

However, such a difference could nevertheless be justified by the division of competences prevailing in Spain between the State and the autonomous communities of that Member State. ( 56 ) Indeed, that division of competences benefits from the protection conferred by Article 4(2) TEU, according to which the Union must respect national identities, inherent in their fundamental structures, political and constitutional, including local and regional self-government. ( 57 )

101.

It is true, of course, that the internal constitutional structure of a Member State may not generally be prayed in aid in order to justify what would otherwise amount to a breach of EU law. But, as the Court observed in Portugal v Commission, ( 58 )‘it cannot be inferred’ from the fact that certain tax advantages are limited to part of the territory of a State that such a measure ‘is selective for the purposes of Article [107(1) TFEU] on the sole ground that it is applicable only in a limited geographical area of a Member State’.

102.

While this reasoning might be thought to suggest that regional taxation and State aid represent something of a special case — almost sui generis in the entire corpus of EU law — it bears remarking that if EU law were otherwise, it would mean that Member States could no longer confer exclusive tax competence on regional entities and local governments. It would also mean that any tax measures covering only part of a territory given the internal structure of a Member State would ipso facto constitute a form of State aid in favour of persons and entities residing in that region as compared with persons and entities residing elsewhere in the Member State in question.

103.

Accordingly, if the referring Court reaches the conclusion that the national constitution does not empower the State to adopt tax measures or to require the payment of a charge in return for the operation of an intra-community basin (neither as exclusive nor as subsidiary nor a complementary competence), this circumstance could justify the fact that electricity producers holding a concession on an intra-community basin are not subject to the said tax and, therefore, that Article 1 of Royal Decree No 198/2005 does not constitute State aid.

104.

On the contrary, and unless the existence of another justification covered by Article 107(2) and (3) TFEU is established, Article 1 of Royal Decree No 198/2015 should be considered as constituting State aid since the latter exempts electricity producers holding a concession on an intra-community basin from paying taxes for the use of inland waters.

105.

Therefore, I propose to answer the third question to the effect that Article 107(1) TFEU is to be interpreted as meaning that the non-applicability of the tax on the use of inland waters to undertakings holding a concession on intra-community basins to produce electric power constitutes prohibited State aid unless it appears that the Member State concerned has neither competence in tax matters nor competence to decide on the level of the royalties payable in consideration of granting a concession over such intra-community basins.

106.

In the light of the foregoing considerations, I propose that the Court answers the questions asked by the Tribunal Supremo (Supreme Court, Spain) as follows: