Regulatory Risks

ACEA S.p.A., through the Regulatory Department, monitors regulatory developments. This involves providing support both with regard to the preparation of comments and observations on Consultation Documents, in line with the interests of Group companies, and the consistent application of regulations in corporate procedures and within the electricity and gas businesses. Management of regulatory risk takes the following form:

  • Management of relations of a technical and institutional nature;
  • Technical and regulatory support in respect of activities subject to regulation and control;
  • Regulatory compliance reporting and monitoring.

Technical-institutional relations are targeted at ensuring the completeness, clarity and consistency of information within the Group. In particular, these are broken down into:

  • Management of relations with the Regulatory Authorities on issues associated with sector regulations and their application by the Group, based on guidelines dictated by top management and based on needs submitted to top management by each company, with support from the relevant offices and departments of the companies concerned;
  • Management of relations with Trade Associations and companies in the sector;
  • Standard representation of Group positions in the management of relations with Regulatory Authorities regarding the technical, economic and legal regulations for the sector;
  • Obtaining assessments and opinions from the companies concerned in relation to technical and economic implications, and the strategic, economic, financial and legal impact of application of the sector regulations.

Technical-legislative support is targeted at ensuring the monitoring of the following processes:

  • Monitoring of technical regulatory activities of the Regulatory Authorities with ongoing technical analysis of documents issued by such authorities, also involving the preparation of opinions, responses or proposed amendments in support of decisions reached with the companies;
  • Examination and planning of initiatives in relation to resolutions and legal provisions with an impact on electrical energy and gas operations;
  • Participation in working parties set up by the Regulator or Trade Associations with a view to preparing and disseminating agreed positions on individual measures or action of a technical-legal nature with a direct impact on areas of interest to the Group;
  • Coordination of the positions stated by the companies on each measure with an impact on operations, with a view to agreeing upon a standardised position expressed externally.

Monitoring and reporting activities are structured into a process of constant internal updating on legislative changes, through the preparation of specific reports to be directed to the parties involved and updating of the agenda of legislative expiries.

 

During the third regulatory period for the energy Networks market, the Italian Authority for Electricity and Gas introduced various new regulations governing tariffs, which continue to give rise to a number of uncertainties resulting from AEEG’s failure to define some equalisation items.

This may represent a risk for the Company’s economic result, and could require further specific analyses that, in most cases, have already been launched together with the Authority’s technical departments. 

There is still a degree of uncertainty regarding the mechanism for determining costs incurred in the development of electronic metering systems and the marketing of transport services.

 

With regard to the equalisation of the costs incurred for electronic metering systems (equalisation of metering), the limited reliability of projections of the economic impact are linked to the weight assigned, in the related analytical formulation, to the creation of specific system parameters, exclusively developed by the Authority and, therefore, not retroactively available to individual operators. The information gap was not filled with either the review of the mechanism for the determination of metering equalisation for the years 2010 and 2011 contained in resolution no. 166/11, given that AEEG did not set out the national variables and parameters which are fundamental for economic forecasts or with the new provisions set forth in resolution 199/2011.

The uncertainty over the equalisation amount of the transport marketing costs persists in 2010 and 2011, despite being mitigated by the publication of resolution ARG/elt/227/10 which set out the criteria to be adopted for the determination of the aforementioned equalisation. In fact, since the Italian Authority for Electricity and Gas has still not collected the data for the years 2010 and 2011, a risk still exists over equalisation amounts deriving from the possibility that commercial costs are not fully recognised by the Italian Authority for Electricity and Gas in accordance with evaluations that are currently not foreseeable.

The new reference tariff by company, published on 26 April 2012 with resolution 157/2012, is still temporary and any corrections shall be published at the end of the asset certification process, which should be completed by March 2013. Uncertainty over the metering equalisation amount also persists for the fourth cycle, linked to the lack of availability of fundamental national variables and parameters for economic forecasts.

Resolution no. 196/11 of 29 December 2011 made provision for the review, starting in 2012, of conventional percentage factors of electricity losses on the networks with the obligation of third-party connection, assessed by AEEG on the basis of a technical study drafted by the Polytechnic of Milan. Applying the resolution caused a decrease in standard losses on high voltage networks. Resolution 175/2012/r/eel on the “review of conventional percentage factors for electricity loss applied to electrical energy input to the LV and MV networks by distributed generation plants” lengthened the time required for the consultation process, deferring further review of the standard loss factors applicable to electrical energy drawn from MV and LV networks to instructions to be issued by 30 September 2013. With resolution 559/2012, AEEG adopted a mechanism for the equalisation of the difference between actual and standard losses between distribution companies, to be applied temporarily in 2012 and the revision of the standard loss factor in the MV sector beginning in 2013, as well as the definition, following a joint technical study between distribution companies and AEEG, of a technical loss coefficient by company. This collection of provisions could generate economic and technical risks for the current structure of equalisation of surplus losses.

 

Water tariff

Details are provided in the sections “Service concession arrangements” and “Update on major disputes and litigation” of the Consolidated Financial Statements.