ARERA electric services: energy infrastructure segment

Distribution and metering tariffs

In 2019, with Resolution 126/2019/R/eel – Launch of proceedings for the infra-period updating of the regulation of tariffs and the quality of electricity transmission, distribution and metering – and with several consultation documents and requests for information, ARERA updated the tariffs and the quality of electricity transmission, distribution and metering for the 2020-2023 regulatory period as defined by Resolution 568/2019/R/eel - Update of the tariff regulation of electricity transmission, distribution and metering for the 2020-2023 interim regulatory period.

For aspects relating to distribution and metering, it envisages:

• the recognition of operating costs in the 2020-2023 interim period, taking as a reference the operating costs for the year 2018 and establishing a symmetrical distribution between enterprise and users of the productivity recovery made in the first interim period (2016-2019);
• the activation of the sharing of net revenues from the use of the electric power infrastructure for purposes additional to electric power service;
• the establishment of a mechanism for the recognition of non-collectable receivables in the event of situations of exceptional arrears relating to the network tariff portion, but postpones its definition to a subsequent measure;
• the promotion of new aggregations between distribution companies;
• the possibility to achieve an increase in the rate of return on invested capital upon request and in a single solution as envisaged in the TIT of 2008-2011 and 2012-2015 (respectively, for the first period, in article 11 and, for the subsequent period, in article 12);
• the extension of the discounts provided for changes in power requested by domestic customers, and in 2020 the method of operation of an equalisation mechanism will be defined with regard to the discounts provided in the period 2016-2019;
• the gradual application over the period of the reactive energy fees;
• the extension of the current rules applied to vehicle recharging points open to the public until the end of the regulatory period;
• the remodulation of the calculation of interest on arrears due to CSEA.

Electricity distribution quality

With resolution 566/2019/R/eel - Approval of the Integrated text of the output-based regulation of electricity distribution and metering for the 2020-2023 interim period, issued following consultation no. 287/2019/R/eel, ARERA updated the TIQE for the 2020-2023 interim period.

Specifically, it envisages:

• the confirmation of the year 2023 for the achievement of continuity target levels, granting them only to the areas with the worst levels of continuity;
• the introduction of a special incentive scheme for critical territorial areas;
• the establishment of a mechanism of regulatory experiments to help improve the quality of service;
• the introduction of the recording of the number of meters replaced due to faulty display;
• from 2021 comparative publication also for voltage dips;
• limiting the premium on the individual project to improve the resilience of the networks to a maximum value equal to the cost of the project itself.

Smart meter 2G

With Resolution no. 306/2019/R/eel – Update for the three-year period 2020-2022 of the directives for the recognition of the costs of second-generation (2G) smart metering systems for the measurement of low-voltage electricity and commissioning provisions – ARERA updated for the three-year period 2020-22 the directives for the preparation of plans for the commissioning of second-generation (2G) smart metering systems and defined the cost recognition mechanisms and penalties for failure to implement the plan or for failure to meet expected performance levels. Although with slight changes, the guidelines presented in DCO 100/2019/R/eel were confirmed, specifically:

• the major DSOs must start the installation phase by 2022 and finish by 2026 (at least 95%), with an intermediate step to be achieved by 2025 (90% of the planned installations);
• it confirms the general principle of not recognising costs associated with voluntary early disposal of 1G meters (so-called stranded meters), and to avoid "two-speed country risk" distribution companies that have yet to submit to the Authority their "2G smart metering system commissioning plan". (PMS2) will have PCO2 calculated in such a way as to encourage the shortening of the current gap;
• starting from year 4, penalties are envisaged for failure to meet expected performance levels (only monitoring is carried out in the first three years of PMS2), with annual and multi-annual ceilings on penalties.

In September 2019 areti sent the Authority a request for admission to the recognition of this type of investment and held a public session to present the plan in October 2019.

The plan envisages the replacement of 2.3 million meters by 2034 with a total expenditure of € 546 million, of which € 318.9 million in capital expenditures. The consultation phase of areti's 2G smart meter plan envisaged in resolution 306 ended in November. The Authority is expected to publish the resolution approving the costs of areti's 2G smart meter systems in 2020.

Resilience

With Resolution 668/2018/R/eel, following two consultations the Authority established initiatives on the resilience of networks. To this end, it has provided incentives for projects aimed at increasing the electricity distribution network's resilience to weather conditions.

The areti company sent ARERA its 2019-2021 resilience plan in order to participate in the incentive mechanism of rewards and penalties as early as 2019. With resolution 534/19 ARERA resolved to include the projects in areti's 2019-2021 Resilience Plans in the mechanism of premiums and/or penalties. About 230 projects are planned for a total of € 69 million in investments, mainly concentrated in 2020, designed to mitigate the risk of heat waves (most of the projects) and flooding (the balance).

Termination of transport contracts for user breach

With Resolution 300/2019/R/eel – Urgent amendments to the Authority's Resolution 50/2018/R/eel concerning uncollected general charges – ARERA excluded from the quantification of the uncollected receivables (to be repaid by means of the current mechanism of Resolution 50/2018) any interest on arrears billed to transport users and recalculates it at the legal interest rate.

Subsequent Resolution 495/2019/R/eel – Provisions on the recognition of non-recoverable receivables relating to general system charges not collected by electricity distribution companies. Confirmation with additions to the Authority's resolution 300/2019/R/eel – clarifies that the provision of Resolution 300/2019 refers to receivables arising after 11 July 2019 (date of entry into force of Resolution 300/2019/R/eel) and provides that the amounts relating to applications already submitted shall be settled by 31 March 2020.

CADE update

With two separate consultations, no. 412/2019/R/eel – Modification of the process of termination of dispatching and transport contracts and activation of services of last resort in the electricity sector – and no. 530/2019/R/eel – Updating of the standard network code for the electricity transport service – the Authority described its guidelines on reducing the exposure of distribution companies by acting on the timing of debt collection and contractual termination, thereby reducing the cost of the system of guarantees for transport users who are in compliance. In order to strengthen the system, it also proposed measures aimed at reinforcing guarantees, with particular attention to the rating and the insurance surety, as well as the clause verifying the regularity of payments and the procedures for verifying the adequacy of the amounts of guarantees given.

Other Deliberations of the Authority

Financial items relating to electricity destined for the states included in the Italian state (Vatican City)

With Resolution 58/2019/E/eel ARERA initiated a fact-finding investigation aimed at better understanding the methods used to manage the regulation of the financial items relating to electricity destined for countries within the Italian territory. At the conclusion of the first analyses, Resolution 491/2019/E/eel closed the preliminary investigation and launched consultation 492/2019/R/eel, with which it defined the Authority's guidelines according to which electricity must be subject to the normal charging rules for the services concerned while it does not consider it appropriate to apply the general system charges.

Riser cables

With resolution 467/2019/R/eel, the Authority initiated an experimental regulation on the modernisation of buildings' old riser cables with effect from 1 January 2020 and for a duration of three years, aimed at:

• performing a national census of old riser cables;
• involving and encouraging the apartment complexes to modernise their riser cables; 
• ensuring greater access to the electricity supply;
• gaining useful experience in order to define a subsequent stable regulatory framework.

Integration between electric vehicles and the electricity grid

With consultation 345/2019/R/eel, the Authority expressed its guidelines for the revision of the conditions for the provision of transmission, distribution and dispatching for electricity withdrawn and subsequently fed back into the grid by the storage systems, as well as electricity withdrawn from auxiliary generation services.

Automatic compensation to end customers for long-term interruptions

With Resolution no. 553/2019/R/eel – Closing of the consultation procedure initiated by Resolution no. 404/2019/R/eel for the execution of the Lombardy regional administrative court ruling no. 1901/2019 voiding the Authority's Resolution no. 127/2017/R/eel concerning the extension of automatic compensation to end customers, charged to network operators, for long-term interruptions – ARERA closed the consultation procedure initiated by Resolution no. 404/2019/R/eel for the execution of the Lombardy regional administrative court ruling no. 1901/2019 voiding the Authority's resolution 127/2017/R/eel concerning the extension of automatic compensation to end customers, at the expense of network operators, for long-term interruptions. The measure also takes into account the outcome of consultation 430/2019/R/eel and a request for information from distribution companies regarding automatic compensation to end customers for extended or prolonged interruptions for the period 1 October 2017 - 20 August 2019.

Losses from electricity distribution grids

With Resolution no. 559/2019/R/eel – Losses from electricity distribution grids: confirmation for the year 2020 of the conventional percentage loss factors and extension of the procedure initiated with Authority Resolution no. 677/2018/R/eel – the Authority confirmed for the year 2020 the values of the conventional percentage loss factors to be applied to withdrawals, injections and interconnections between grids.