Italy approves decisive gas deregulation bill

Italy approved a bill May 19 fixing new antitrust ceilings and implementing other measures to open up the heavily monopolized domestic natural gas market, in compliance with European Union directives. The full text of the bill will be published in a matter of days, but Minister of Industry Enrico Letta has provided a glimpse into its contents.


ROME�Italy approved a bill May 19 fixing new antitrust ceilings and implementing other measures to open up the heavily monopolized domestic natural gas market, in compliance with European Union directives. The full text of the bill will be published in a matter of days, but Minister of Industry Enrico Letta has provided a glimpse into its contents.

Beginning in January 2002, no company or group will be allowed to supply more than 75% of domestic gas demand. This ceiling will be further reduced 2%/year to 61% in 2010. Furthermore, no single operator will be allowed to dominate more than half of the end-consumer market. And customers, including consortia, with demand exceeding 200,000 cu m/year will be able to buy gas on the free market beginning in 2002.

Italy's aim is to decrease costs for energy-intensive industries. But starting in January 2003, all customers, regardless of their demand, will be allowed to buy their supplies on the free market. The goal of the government is to lower the retail price of natural gas, which to date has been one highest in Europe�13% above the regional average for consumers and 34% above average for industrial customers, according to the industrialist association Confindustria.

Demonopolization
ENI SPA's gas transport arm, Snam, which controls 90% of the Italian natural gas market, will have to "unbundle" its accounts with regard to transportation, storage, and distribution of natural gas, and will be split into at least two companies.

The antitrust watchdog will be the Energy and Gas Authorities, whose powers are being redefined by the Italian Parliament. By fall, the authorities will issue a new set of fair tariffs. This should allow other players, like Edison and new entrants, to use the Snam high and low-pressure networks without discrimination with regard to access, quantities carried, or price.

The government also decided not to grant ENI stranded-cost status for the money it spent building Italy's gas network.

Snam's competitors consider the bill balanced, on the whole; they, of course, appreciate the high degree of market opening that it provides. Confartigianato, representing small industries and crafts, called it a "daring innovation."

However, Federgasacqua, the association of municipal utilities, aired some doubts. Its chairman, Andrea Lolli, said he fears "the deregulation will basically concern distribution and sales, and only slightly impinge on the upstream�i.e., production and import�which directly determines the price of the raw material." Most of this will stay in the hands of Snam, as long term take-or-pay contracts.

Projections to 2010 show Italian demand for natural gas reaching 37% of total energy demand. And deregulation is key to meeting the increased demand. As a result of the rule, said Minister Letta, "We expect a structural plummeting of tariffs and a realignment of Italian prices with the European average."

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