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Electricity area

EE – Regulatory framework

Nuclear energy development
With the Development Law passed at the beginning of last July, the Government received the proxy to adopt, within six months from the entrance in force of the afore mentioned law, some decrees aimed at starting a development program of nuclear energy in Italy. These decrees shall include regulations on the location of the new plants and storage systems of radioactive wastes, compensation measures to the paid to residents of the areas in which the plants are to be installed and the rules regarding the authorization procedures and requisites for the construction, the operation and dismantling of nuclear power plants. In view of promoting the development of nuclear power, the Legislator set out that this type of energy shall have the same dispatching priority provided for renewable energies and co-generation.

Virtual power plant in Sardinia
The Development Law, aiming at increasing competition in the "Sardinia" market area, provided for a procedure of virtual sale of production capacity. In order to execute law provisions, the Ministry for Economic Development set out a five-year term and the extension of the program (25% of local needs). Following these trends, last August the AEEG issued the Resolution Arg/elt 115/09, which defines the selling subjects, as well as the instruments to be adopted in the procedure, criteria for the definition of auctions to sell the capacity and terms to take part in the auction.

Development of network infrastructures
The main legislative interventions regarded the electric sector during 2009 and had a remarkable impact on the regulation of infrastructures. In particular, the Development Law introduced some rules aiming at simplifying the authorization procedures while providing for, amongst other, one single authorization to build electroducts. As regards the expansion of connections abroad, Terna was conferred the task to program and build new infrastructures (interconnectors) in order to achieve an increase of 2000 MW in interconnection capacity. These actions shall be carried out also through the financing by private subjects (end users with high energy needs), selected before the examination procedures that will be implemented by the Grid Operator. Conversely, as for the internal network development and in order to overcome the stalemate in a number of planned investments, the Anti-crisis Law allocated, for single and particularly urgent interventions, extraordinary assets and powers to complete the authorization phase (commissarial administrations). It should be noted that commissaries will act only in cases in which the competent Administrations have not fulfilled the legal terms for the issue of authorizations and the effective implementation of interventions.

Emission trading system: assignment resolution of 2008-2012 quotas
On 29 February 2008, the Ministry for Environment, Land and Sea and the Ministry for the Economic Development approved the assignment resolution of CO2 emission quotas for the 2008-2012 period. The Resolution was notified to the European Commission for a consistency control with the Resolution of the Commission of 15 May 2007. Both the Resolution approving the assignment proposal of CO2 quotas and the Resolution of 27 November 2008 of the Committee for the implementation and management of Resolution 2003/87/EC (implementing the Resolution of assignment proposal) were published in the Ordinary Supplement no. 275 to the Official Journal no. 291, dated 13 December 2008. The following amounts of quotas were assigned to the plants held by Hera:

Assignments of the allocation national plan (Pna) (t CO2)
 20082009201020112012
Teverola720,466684,443655,624619,601590,782
Sparanise1,414,9021,344,1571,287,5611,216,8151,160,219

As regards the plant COGEN Imola, the assignment regarding the operating period will be carried out through the assignment of quotas taken from the "Reserve for new entries".

The reform of the electricity market (the so-called “Anticrisis decree law”)
At end November 2008, the Italian Government issued the Decree Law no. 185 of 29 November 2008 (indicating "Urgent measures in support of families, labour, employment and enterprises, and rearrangement of the national strategic framework as an anti-crisis measure”). This decree provides for, but not limited to, a series of innovations affecting the ongoing of the electricity market. The main elements of the reform are the following:

  • Creation of an Inter-Day Market of energy, with continuous trading, integrated with the Dispatching Service Market (MSD) and replacement of the current adjustment market.
  • Reform of the MSD operational processes, based on transparency and economic efficiency criteria in selecting resources and to be implemented based on criteria of economic merit order. Moreover, the reduction in costs borne by the Market Operator would be also through negotiation of future services rendered. Finally, it was set out that, in special situations of grid congestions or danger for the safety of the system, possible interventions of the Authority is provided for. The latter will have the faculty of pinpointing some plants for the supply of key dispatching services.
  • Re-examination of the mechanism of price formulation of energy on the Day-Ahead Market (MGP) to be defined based on the criteria of economic merit order (this review is to be made before amendments regarding the Intra-Day Market and its integration with MSD.
  • Publication by the GME of offers submitted on the MGP within 7 days and data on not availability of grids and plants on a monthly basis, except for cases regulated by the Authorities.
  • Promotion of the widening of physical and financial forward markets for energy, through the development of new products, even long-term products.
  • Provision that, within 24 months, the MSE, upon proposal of Terna, may divide the National Transmission Network in not more than three macro-zones.
  • Provision that the MSE, after hearing the Authority, may intervene with temporary measures to promote competition in the areas where abnormal market behaviour may occur.  

Pursuant to Law 2/2009, on 29 April 2009, the Ministry for Economic Development issued an implementation decree which indicates the guidelines for the reform of the electricity market legislation, while setting out the implementation terms of interventions of the competent bodies. The ministerial decree set out, but not limited to:

  • the replacement of the adjustment market with an intra-day market, articulated in two or more sessions, starting from November 2009, as well as its integration with the dispatching service market, starting from 2011;
  • a new organization of the dispatching service market based on the type of services offered, starting from January 2010;
  • the evolution of forward electricity markets (MTE), with a wider range of listed products, starting from January 2010.

The same provision postpones the evaluation of the possible change of training rules on MGP to April 2012, after completion of the reform process and subsequent analysis on its efficacy. Today, the reform of the market saw the introduction of the intra-day market (the first session was held on 31 October 2009, with flow day on 1 November 2009) in place of the adjustment market. This market, which allows operators to make amendments to programs defined in MGP through further purchase or sale offers, is carried out in two separate sessions. Simultaneously, as regards the reform of MSD, Terna approved some amendments to the Grid Code in force since 1 January 2010. Amongst the main novelties that have an impact on the rules for dispatching, the following is to be highlighted:

  • Possible submission of a special offer for switching off.
  • Possible submission of a different price for the ancillary reserve with respect to price for other services.
  • Possible submission of different offers for each hour of the day.
  • Change in restraints for the permanence of service provision.
  • Possible modification, in subsequent sessions, of offers already submitted (only for lower prices)..

New regulatory framework in the green certificate market
As regards green certificates, the Development Law, approved in July 2009, sets out in art. 27, subsection 17, an important novelty: the mandatory input of energy produced by renewable sources and the alternative submission of green certificates for its own mandatory quota, is transferred from non-renewable energy producers/importers to the subjects which sign with Terna electricity dispatching contracts on intake points. Therefore, the electricity quota produced by renewable sources to be mandatorily input in the grid shall no longer be calculated based on the output of the previous year, but based on the energy taken from the grid. In relation to the coming into force of this “reform” of green certificates, the Decree Law on community obligations was issued and finally approved in November 2009. This Decree Law set out the postponement from 2011 to 2012.  

Electricity - Significant events

Consolidation of the electricity trading activity
In spite of the fact that, over 2009, a strong turn-over of dedicated resources was recorded, the trading of electricity and green certificates was consolidated and structured, and this also by reason of the internally-developed support tools, as well as of the implementation of risk exposure control measures and the correct disclosure in the financial statements of assets based on IAS criteria (Fair Value and Mark to Market (M2M)).

Consolidation of the asset management structure
Together with the full operation of plant in Teverola and Sparanise and the start-up of the COGEM Imola plant, the business unit of ASSET MANAGEMENT further consolidated its presence in the Electricity Area. This business unit is aimed at managing the logistics and dispatching of energy produced from plants as well as streamlining the related Power Purchase Agreements (PPA) and Tolling.

Start-up of cogen imola plant
Starting in October, after completing the fist phase of final tests, the COGEN IMOLA plant started its production and was therefore being managed, as regards trading issues, by Hera Trading, according to an electricity supply contract. The Tolling contract, signed with Hera Spa, entered in force on 1 January 2010.

Setting-up of the hera comm's sources portfolio
During September and October, the Sources Portfolio was set up for Hera Comm’s trading activity, by using the electricity produced from the plants in Teverola, Sparanise and part of the electricity produced by Tirreno Power, all purchased on the over the counter (OTC) platform during the year. A bilateral contract signed with ENI Gas & Power was also used. The 2010 long-term contract with ALPIQ was also renegotiated at the end of the year.

Acquisition of import and export capacity
In December, Hera Trading took part in auctions organized by Terna and aimed at assigning import and export capacities through the borders with France, Switzerland, Austria, Slovenia and Greece, resulting in an assignment for import of 10 MW per year and 5 MW for March from France, and an assignment for export of 5 MW towards Austria, 10 MW towards Switzerland and 12 MW towards France.

Development of the tamarete project
The contract terms regulating the techno-commercial operation of the thermoelectric plant in TAMARETE were negotiated with the partners. This plant in Ortona is almost completed.

Control policy and credit management
In 2009, the Control Policy and Credit Management in the Hera Trading area were defined. The progressive importance that the counterpart risk is gaining, also by reason of the severe economic crisis which started from the second half of 2008, rendered the adoption of a suited Policy impossible to be postponed.  

 
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