Regulatory Framework

Law no. 35 of 4 April 2012 - conversion into law of the “Simplification and Development” Decree Law no. 5 of 9 February 2012

Art. 58 of Law no. 35 of 4 April 2012, converting the “Simplification and Development” Decree Law, amends art. 45 of Legislative Decree no. 93/11 (called the “Third energy package”), regarding the regulation used by AEEG to govern penalty proceedings. First of all, it is established that that regulation shall also govern cases in which the Authority can adopt simplified procedures for applying administrative fines after making an agreement with the company involved in a penalty proceeding.

Furthermore, in particularly urgent cases, AEEG is authorised to adopt precautionary measures, even before the enquiry concerning a market operator begins.

 

Containment of credit risk for the retail electricity market and setting up of an indemnity system: Resolution ARG/elt 219/10 - updates

The Indemnity System entered into operation in 2011. This involves an initial transitory phase while waiting for said system to be incorporated in the Integrated Information System (IIS) for the management of relations between market operators. Sellers in the free market and the market subject to additional safeguards registered with the Indemnity System can, through the aforementioned registration, request indemnity to partially cover arrears left by customers that changed supplier, through the request to the system for application of the Cmor component (called outgoing sellers). The distributor shall apply that component to sellers that have acquired delinquent customers (called incoming sellers), which in turn reverse this component to the customers acquired. In addition, solely sellers registered in the Indemnity System will have access to information flows regarding requests for the Cmor component that will be applied to them, as incoming sellers, by distributors and requested by other outgoing sellers registered in the system.

However, some sales operators have reported potential critical issues to AEEG in relation to the incoming vendor due, on one hand, to the risk of non-payment of the Cmor fee by the end customer and on the other hand, to an increase in litigation and the management of end customer claims. Following these reports, the Regulator launched a procedure to adopt measures regarding the completion of the regulation in order to minimise potential criticalities in the Indemnity System for incoming vendors.

In 2012, when the procedure was complete, resolutions 99/2012/R/eel and 195/2012/R/eel were issued, which amended and supplemented Annex B of resolution ARG/elt 191/10.

In detail, the resolutions established:

  • the introduction of specific solutions to protect the incoming vendor, both by postponing the deadline by which the distribution company bills the Cmor fee, and by introducing new procedures which in some situations provide the possibility for the incoming vendor to request the suspension or cancellation of the Cmor fee charge in its regard;
  • the launch of specific monitoring of the phenomenon of situations of non-payment of the Cmor fee by end customers, for that purpose providing for a specific flow of quarterly communications for sending monthly data and limiting the data collected by incoming vendors to information that is not available to the IS Manager.

 

Implementation of art. 24 of Legislative Decree no. 28 of 3 March 2011, concerning incentives for energy production by renewable energy source plants other than photovoltaics: Decree of 6 July 2012

With the decree in question, the Ministry introduces new incentives for renewable sources that will come into effect beginning next year. Amongst the sources considered are hydroelectric power plants with nominal power of up to 50 kW, biomass-fuelled plants with power of up to 200 kW and biogas-fuelled plants with power of up to 100 kW, as well as wind, hydroelectric and biomass power plants installed by public administrations with recourse to public tender procedures, with power of up to double the amounts indicated above. The Decree sets forth that parties which request access to the incentive mechanisms must pay the national grid operator (GSE) a contribution for preliminary enquiry expenses. The contribution includes a fixed amount of 100 euros, plus a variable portion on the basis of the plant’s power. The national grid operator subsequently published a note providing some instructions on the “communication of the date of entry into operation” of plants and concerning the request for recognition of the Renewable Energy Source Plant qualification.

In particular, for plants which began operating before 24 August 2012, those terms are extended to September 2012 and February 2013, respectively. Finally with its Notice of 27 August 2012, it again specified that the date of entry into operation corresponds to the date on which the plant begins functioning in parallel with the electricity system subsequent to the completion of works (new construction, total or partial renovation, upgrading, reactivation). Completion of works refers to the installation of all machinery and electromechanical devices and the completion of civil works related to the plant in compliance with the authorisation, particularly with regard to the power and overall configuration of the plant, including the metering and network connection devices. The Responsible Entities that send notification of the entry into operation of the plant before 24 August 2012, in accordance with the methods set forth before publication of the Application Procedures of Ministerial Decree of 6 July 2012, are not required to send a new notice, upon verification of compliance with the specifications of the previous point.

 

Resolution 79/2012/R/com “Approval of the Integrated Information System (IIS) regulation”

The measure approves the Integrated Information System (IIS) regulation. Furthermore, the Regulator identifies the parties which must obtain accreditation: Terna, the distribution companies, dispatching users and primary utility providers.

The accreditation of users for the IIS shall take place with the following timing:

  • from 01/07 to 31/08 2012, accreditation begins for all distributors;
  • by 31 December 2012, the accreditation of Terna, Dispatching Users and Primary Utility Providers will be completed.

 

Law no. 134 of August 2012 - conversion into law, with amendments, of Decree-Law no. 83 of 22 June 2012, setting out urgent measures for the growth of the Country. Updates concerning concessions for large-scale abstraction of water for hydroelectric use.

Article no. 37 of Law no. 134 of 2012, converting the “growth decree law” of June 2012, introduces significant amendments to the timing and criteria for awarding tenders for hydroelectric concessions, affecting article no. 12 of Legislative Decree 79/99 (Bersani Decree).

The measure establishes:

  • the assignment for payment of those concessions shall be put up for tender five years before their expiry for a period of from twenty to a maximum of thirty years, in relation to the extent of the investments deemed necessary, with regard to a series of interventions (improvement and environmental rehabilitation of the drainage basin, territorial compensation measures, etc.), with particular importance placed on the economic bid to obtain the use of water resources and the increase in energy generated or installed power;
  • since compliance with the timing set forth above is considered impossible for concessions already expired at the date of entry into force of Law no. 134/12 and for those expiring by 31 December 2017, the tenders shall be called within two years of entry into force of the implementing decree (not yet issued) and the new concession shall begin from the end of the fifth year subsequent to the original expiry and in any event not beyond 31 December 2017;
  • the same decree establishes the criteria and parameters for defining the concession duration based on the extent of investments as well as, having consulted with AEEG, the technical and economic parameters for determining the fee and amount due to the outgoing operator, and it also establishes the percentage of the winning bidder’s economic bid to be allocated towards reducing electricity costs to the benefit of the general population of end customers.

The aforementioned art. 37 of Law no. 134/12 also establishes that, to ensure operational continuity, the call for tenders must provide for the transfer from the outgoing operator to the new operator of ownership of the business unit relative to concession management, including all relative legal relations.

Therefore, the outgoing operator shall be due a pre-established amount agreed upon between it and the awarding administration before the bid phase, which shall be published in the call for tenders. The methods for determining that fee are also explained, and are based on the market value (value for new construction decreased by ordinary depreciation) for tangible assets other than those pursuant to article 25.1 of Royal Decree no. 1775/1933 (i.e. other than collection, regulation, penstock and drainage channel works). The amount due for the assets pursuant to article 25.1, mentioned above, is based on the revalued historical cost method, calculated net of public grants, also revalued, received by the operator to carry out those works, decreased by ordinary depreciation. If an agreement is not reached, three independent qualified third parties, one of which is appointed by the president of the Court of public waters responsible for that jurisdiction, shall be appointed for that purpose.

Finally, to ensure standardised governance of hydroelectric generation activities throughout the country and equal treatment to economic operators, a Ministry of Economic Development decree established the general criteria to be applied by the regions in determining the maximum values of hydroelectric concession fees according to criteria of economic efficiency and fairness.

 

Resolution 195/2012/R/eel “Approval of the simplified regulations for operation of the indemnity system and related monitoring”

The measure approves the simplified regulations for operation of the indemnity system pursuant to resolution ARG/elt 191/09, as amended in order to incorporate the new procedures set forth in the event of non-payment of the CMOR fee by end customers. More specifically:

  • it changes the criteria for identifying the date beginning from which the CMOR fee shall be applied by the distribution company, making the period begin from the first day of the month in which the Operator communicates acceptance of the indemnity request, facilitating the unambiguous identification of that date by all indemnity system participants involved and the resulting possibility to eliminate the Operator’s notification of the aforementioned date to the incoming vendor;
  • it specifies the starting date of the period for application of the CMOR fee by the distribution company;
  • it changes the timing of the procedure for cancellation or suspension of the indemnity request by the incoming vendor in order to extend the deadline for submission of the relative requests by two working days;
  • it introduces the obligation to revoke the request for cancellation or suspension by the incoming vendor if, subsequent to that vendor’s request, the customer pays the CMOR relative to the previously cancelled indemnity request;
  • it incorporates the simplification of indemnity system monitoring, proposed by the majority of operators, for that purpose providing for a specific flow of quarterly communications for sending monthly data and limiting the data collected by incoming vendors to information that is not available to the IS Manager.

 

Review of mechanisms for credit risk containment and recognition to primary utility providers of costs linked to delinquency: resolution 583/2012/R/eel

With resolution 364/2012/R/eel, the Authority launched a procedure aimed at reviewing the current mechanisms for containing credit risk and recognising costs related to non-payment of invoices by end customers to primary utility providers, partially in order to take into consideration the different impact that this phenomenon has throughout the country.

Subsequently, after two consultations and a request for data from primary utility providers, AEEG published resolution 583/2012/R/eel. The most significant updates are:

  • the value of the guarantee deposit already set forth in paragraph 12.1 of the TIV, as well as the manner for charging it, shall remain unchanged;
  • the level of the RCV component for the remuneration of primary utility providers has been revised, although there shall continue to be a single price paid at the national level by customers subject to additional safeguards. That component, which would continue to be differentiated based on the various types of end customers subject to additional safeguards, would be further distinguished into two different geographical areas (centre-north and centre-south), taking into account the unpaid ratio level (rate of receivables past due by over 24 months) surveyed at the most efficient primary utility providers;
  • the level of the PCV fee applied to non-domestic end customers has been revised from 49.70 euros to 69.6154 euros per withdrawal point per year;
  • for the year 2012, an offsetting mechanism has been established which makes it possible to apply the RCV component defined in accordance with this measure;
  • the level of the DISPBT component applied to end customers entitled to additional safeguards has been revised;
  •  the level of costs relating to delinquency, used to define the RCV component, shall be updated annually, with a definition of the special information obligations of the separate companies;
  • the interest rate due by the primary utility provider in the event of delay in the settlement of amounts with the Equalisation Fund, is equal to the Euribor rate + 3.5 points beginning on the first day after the due date.

The provisions shall come into effect on 1 January 2013.