European Commission adopts new SGEI decision declaring compatibility of public service compensation
On 18 December 2025, the European Commission adopted its revised decision on the application of Article 106 (2) of the Treaty on the Functioning of the European Union to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest (“SGEI Decision”). The SGEI Decision exempts from prior notification to the European Commission public service compensation upon compliance with certain compatibility conditions. Replacing the current SGEI decision adopted in 2011, its main revisions concern the increased notification thresholds, clarifications, administrative modifications and the inclusion of affordable housing within its scope.
The SGEI Decision builds on feedback from a Call for Evidence and an initial public consultation held in June and July 2025, which received more than 250 responses. A “reality check” meeting with Member States and stakeholders provided further insights into the practical barriers encountered when applying State aid rules to affordable housing initiatives.
The European Commission had, in October 2025, submitted to a public consultation its revision of the State aid rules governing SGEI, with the aim of updating the notification thresholds and enabling Member States to support affordable housing more effectively.
The SGEI Decision provides the following new notification thresholds:
- compensation not exceeding an annual amount of EUR 20 million per single undertaking for the provision of SGEI in areas other than transport and transport infrastructure, including social services (except health and long-term care, childcare, access to and reintegration into the labour market, and the care and social inclusion of vulnerable groups, including accessibility and assistive technology services for persons with disabilities, not submitted to a compensation cap) and critical medicines; the current compensation is EUR 15 million;
- compensation for the provision of SGEI for air links or maritime links to islands whose average annual traffic during the two financial years preceding that in which the SGEI was assigned does not exceed 75,000 linear metres of freight; the passenger cap remains at 300,000 passengers;
- compensation for the provision of SGEI for airports and ports whose average annual traffic during the two financial years preceding that in which the SGEI was assigned does not, in the case of airports, exceed 500,000 passengers and, in the case of ports, 400,000 passengers, or for ports located in outermost regions regardless of the average annual traffic; the previous thresholds were 200,000 passengers for airports and 300,000 passengers for ports.
Public service compensation that qualifies as State aid and is not within the scope of the SGEI Decision must be notified by Member States to the European Commission prior to its award and must comply with the European Union framework for State aid in the form of public service compensation – this framework provides for stricter conditions for authorising the compensation.
Furthermore, the SGEI Decision marks a key step in the Commission’s broader efforts to address the growing housing affordability crisis across the European Union. Indeed, Commissioner Ribera’s letter of mission provides for the explicit mission to propose a revision of the State aid rules to enable housing support measures, notably for energy efficiency and social housing.
The Commission acknowledged that its SGEI decision adopted in 2011 no longer fully addresses the challenges of today’s housing market, where affordability concerns extend beyond traditional social housing aimed at by the 2011 SGEI decision. Under the SGEI Decision, affordable housing is defined as “housing for households who are not able, due to market outcomes and notably market failures, to access housing at affordable conditions”. This new category recognises that market dynamics, such as rising demand in urban areas, escalating costs and insufficient supply, prevent low-income households from accessing suitable housing. By broadening the SGEI framework, the Commission seeks to ensure faster and simpler procedures for granting aid while maintaining the principle of subsidiarity, enabling Member States to tailor measures to their specific housing contexts.
For the purpose of administrative simplification, the SGEI Decision abolishes the requirement to refer to the European legal basis in the entrustment document. Furthermore, Member States do not have to provide the European Commission with a complete report every two years on its application. However, from 1 January 2028, information on compensation exceeding EUR 1 million (identification of the beneficiary, national legal basis, compensation amount, granting date, duration of the entrustment, NACE code, etc.) will have to be registered in a central register within 20 working days of the granting of the aid (corresponding to the adoption of the entrustment act). Currently, the obligation of transparency is limited to publication on the internet or other appropriate means of the entrustment act for amounts of compensation aid above EUR 15 million.
The European Commission has also included clarifications on the concept of reasonable profit that can be generated by SGEI and the control of overcompensation.
The new SGEI Decision was published in the Official Journal of the EU on 19 December 2025 and cam into force at the beginning of January 2026.
Unfortunately, the revision of the EU State aid rules does not solve the issue of national budgetary constraints.
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