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Energy

 

The main changes that have been made to the regulatory framework and tariff system in the reference markets

Energy: evolution of the regulatory framework 

The most significant regulatory innovation in energy markets regards completing the path taken towards full deregulation of demand. With the passing of the bill on 1 July implementing the 2003 community directive, the right of any end consumer to choose its supplier was established, in addition, the type of “managed deregulation” of the national market was confirmed, by the confirmation of the power of the authorities regarding electrical energy and gas (hereinafter AEEG), to establish regulated prices, and reference prices for categories of customers who are considered worthy of protection (families and small companies, identified by turnover and number of employees).

A type of controlled protection (so called safeguarding) will be provided to other customers who do not qualify to be protected, and who are generally professionals and business people, but who could not be considered to be part of the “unregulated market” as long as they have not agreed a contract with an alternative supplier to the distributor who served them under the regulated regime, at the date of starting. The lawmakers chose a competition model for the market to introduce competition in the provision of services to this category of customer: the country was subdivided into macro-regions, in which a tender process was organised with offers based on a parameter representing the procurement costs established by the AEEG.

In definitively opening the domestic market to competition, the legislation also provided for the introduction of caution and regulation to encourage transparency and the separation of company operations among the different segments. Specifically, in the electricity sector, there is a net separation (previously applicable in the gas market) between sellers and distributors, who were the suppliers to the captive customers in the previous system.

Energy and environment

The support given to electricity produced from renewable sources was radically renewed by the 2008 finance law, after which bills were presented to parliament (not yet completed), to partially overcome the “market” regime (green certificates) in favour of managed support prices, with different benefits according to the source. 

The lawmaker took the intermediate route, safeguarding the model of market valuation for the entitlements corresponding to energy produced from renewable sources, and at the same time, introducing differentiating elements which were not in the previous system. The new scheme provides that the green certificates will last for fifteen years now, and for a system of multipliers that increase benefits in accordance with the sustainability of the source (the entitlements granted to organic waste, for example, equal 1.1 times the energy produced) for plants starting operations from 1 January 2008 and powered by renewable sources as defined under the directive 2001/77/EC. An alternative system of managed withdrawal prices is reserved to smaller plants (power less than 1 Mw).

The “rights acquired” by plants that use sources not specifically listed in the definitions of community laws, and that were allowed benefits in accordance with undertakings to produce from renewable sources taken when approving the directive (for example Cip6 and green certificates for energy from waste), are protected for the plants that started up operations by 2007.

However, the ministry for economic development can make an exception to the limitation for plants with special significance, protecting those actually being built in particular.  The decree was not issued when drafting this report. On the other hand, an exception in favour of the waste-to-energy plants planned to deal with the waste emergency in Campania was explicitly provided by the chairman of the council of ministers as an emergency measure.

The finance law also provides for the creation of a fund to facilitate the granting of CO2 emission certificates for the new parties entering the electricit market.

Among the more important provisions forming part of the new support framework for renewable sources that help bring Italy into compliance with community regulations regarding integration of environmental aspects into energy policies, we note:

  • the approval of the national allocation plan for the second phase of the European market of the CO2 emission rights
  • the revised decree on energy saving objectives that increases the amount of obligors (distributors with at least 50,000 customers as opposed to the previous cut-off of 100,000) while awaiting the complete review of the matter in implementation of the transposition of the directive on efficiency in the final use of energy, currently undergoing approval
  • the legislative decree that promotes high yield cogeneration in the electricity market
  • the application of the regulation that extends the granting of green certificates to plants powered by fossil fuels connected to local networks of waste to energy systems.

 

Regulations: cross-over matters

The entry into effect of the separation of operation regulations was postponed from 1 January to 1 July 2008. Vertically integrated operators must have adopted a plan to fulfil obligations by that date, and have prepared the necessary organisational changes needed to put the independent network supplier into operation.  The disputed admittance of some operators, has been resolved in favour of the AEEG, at least temporarily. The administrative judge of the first instance recognised the authority to separate operations, in addition to the proportionality and the consistency of the measures undertaken with decision 11/2007.

The new rules on accounting separation are, in any case, already in effect for those operators that did not request an extension. The AEEG intends to increasingly use separated accounts for pricing purposes.

Support instruments for market dynamics were introduced in both of the regulated sectors. One is the withdrawal rule which can be applied in the event of default. In addition the distributors are obliged to provide the essential information in order to make sales offers to protected customers to the sellers who so request.