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Regulatory framework

Regulatory framework

The implementation of the reform of art. 23 bis of Law No. 133 of 6 August 2008, as amended by subsequent regulations issued in 2009, shall have a significant impact on the market for local public services. In particular, Law no. 166 of 20 November 2009 shall, on one side, give new market entrants access to the capital of numerous "in house" companies and, on the other, limit the original protection of listed companies, to mixed public-private investments, with a license duration conditioned to the reduction of public shareholdings, which shall be below 40 percent by 30 June 2013, and below 30 percent by 31 December 2015. The enactment provisions, originally provided for by art. 23 bis, though long prepared by the Government, have not yet been issued, pending the necessary opinion of the State - Regions Conference.
Further changes to the reform to be introduced by art. 23 bis have been focused on the review of its application area, with the exception of services (gas, electricity and transport), which are once again managed by their specific regulations. In particular, the exclusion of the gas sector from the scope of Article 23 bis., without prejudice to Article 46 bis of Law no. 222 of 29 November 2007, which provides for the determination, by ministerial decree and at present provisionally defined, of the new competition areas for the allocation of the distribution service.
The preparation of the corresponding decree is still to be assessed favourably, either because it represents a turning point in a process that began long ago, or because it defines an average area size, coinciding with the provincial level and a maximum of three hundred thousand end customers, which is in line with the industrial needs and expectations of the Group.

In the area of renewable sources, Law no. 99 of 23 July 2009 introduces important changes. Worthy of mention is the shift from the supply (producers and importers) to the demand side of the obligation of injection of a given amount of renewable energy, and the upward adjustment, from a value of 1.1 to a value of 1.3, of the multiplier coefficient for energy produced from the processing of biodegradable waste, as required by the bonus system envisaged in the 2008 Finance Act, for purposes of the Green Certificates calculation.

Always pursuant to Law No. 99 of 2009, a 5 billion Smc gas release is planned to stimulate the competitive system and the market opening, where the price awarded to the transferor will be comparable with the European average prices and where the spread between that price and the amounts paid to purchasers will be given in favour of business customers who can provide proof of a given gas drawdown rate.

Finally, in the interest of consumers, the same regulation introduces a new standard for Class Action. A class action may be undertaken by individual "domestic" customers and not by businesses, professionals, or companies. It may be aimed at businesses that provide a public utility (for example providing electricity or gas to consumers) or at concessionaires of public services operating as a legal monopoly (for example, companies operating an integrated water service), and is limited to the contractual relationships with the aforesaid consumers.

Lastly, it should be noted that pursuant to Law no.2 of 28 January 2009 (law for the conversion of Italian Law Decree no.185 of 29 November 2008), entitled "Urgent measures in support of families, labour, employment and enterprises, and rearrangement of the national strategic framework as an anti-crisis measure", a series of changes were introduced to improve the operation of the national electricity market. Among the key changes, it is worthy of mention the planned modification of the price determination mechanisms of electricity, from the current Marginal Price System to the Pay as Bid System, amendment which was later suspended by executive decree of the Ministry of Economic Development (MSE), which postponed the assessment to April 2012.

With regard to regulatory enhancements, the main changes concerned the gas sector. The Italian Authority for Electricity and Natural Gas, through resolution ARG/gas 64/09, approving the Integrated Text on Natural Gas Sales (TIVG), has consolidated and streamlined the rules affecting the market for the sale of natural gas to end customers entitled to "protection service". Among the changes introduced in a context of overall continuity with the past, we may highlight: the progressive restriction of the scope of "protection services", which since 30 September 2010 will cover only domestic end customers, and the validation of calculation criteria and the existing levels for the Wholesale Component (CCI), and the tariff recognition increase for the coverage of marketing costs for Retail Sales (QVD).
These new provisions have been positively assessed by the operators, as deemed suitable to create sufficient leeway to foster competition in the natural gas retail market, which in recent years had seen a downturn.

The Authority has approved the standard tariffs for the distribution of natural gas for the 2009-2012 period through resolution ARG/gas 79/09. In order to reduce the tariff increase resulting from the application of resolution ARG/gas 159/08, to define the standard tariffs the Authority has extended the application of the coefficient of sliding scale also to the part of the tariff covering depreciation, while the resolution expressly excluded its application to capitalised costs.

Common to the electricity and gas businesses, the general unbundling regulation contained in resolution no. 11/07 has been the subject of a complex litigation matter, which involved, among other things, a recent ruling from Regional Court of Lombardy. The latter, expressing a negative opinion on the validity of the resolution ARG/comm 132/08, aiming to define guidelines for the compliance program with regard to unbundling, confirms the decisions contained in the ruling of the State Council, issued upon appeals for the overruling of resolution n.11/07.
In summary, there are three parts of the regulation impacted by litigation: the inclusion of gas measurement in unbundling, which has been found unjustified, the inclusion of certain supervisory figures in the independent Service Operator, on which a final resolution by the Authority is still expected, and finally, the degree of pervasiveness of the Guidelines on preparedness of the compliance program by the independent Service Operator, which was deemed excessive. This shall result, without prejudice to the inalienable principles of independence, impartiality and transparency in network management, in an increased flexibility and awareness, declared by the same regulator in consultation, of the "transitory" nature (pending, namely, the completion of the structural market reform, this time through competition) of some of the provisions on unbundling, such as those on information systems, of high organizational and business impact.

Other changes regard the reordering of the operations relating to the regulation of physical and economic items of the distribution service, through the adoption of the Integrated Text of the Settlement, the enactment, in the future dual fuel scenario, of a directive for the harmonization and transparency of a single billing document for both regulated businesses, and the start, also for the electricity business, of the adoption process of communication standards between vendors and distributors, preparatory to the introduction of a network code by distributors and by market operators expected.

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