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The structure and role of the Italian Regulatory Authority for Electricity and Gas

What is the Regulatory Authority for Electricity and Gas
In what ways is the authority autonomous?
How long has it been operating?
Who are the Authority's members?

What are the Authority's main objectives?
What are the Authority's functions?
How does the Authority operate?
The authority in the international context
Addresses

What is the Regulatory Authority for Electricity and Gas

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The Italian Regulatory Authority for Electricity and Gas is an independent body established under Law 481 of 14 November 1995 to regulate and control the electricity and gas sectors.

An independent authority body is a public body which makes its own decisions under the terms of its founding law, procedures and regulations. It enjoys a high degree of autonomy from the government in its judgements and evaluations. Its regulatory powers include the setting of tariffs and the definition of service quality standards and the technical and economic conditions governing access and interconnections to the networks for those services where technical, legal or other constraints would interfere with normal competitive market conditions and the ability of the market to protect the interests of users and consumers.
The Authority has a board made up of five(1) commissioners: the President and four Members. All commissioners are appointed by decree of the President of the Republic following nomination by the Council of Ministers on the basis of a proposal by the Minister of Productive Activities. Nominations are submitted to the competent Parliamentary Committees for scrutiny, and the appointment is based on a two-thirds majority vote.

The commissioners are selected from highly qualified, experienced professionals in the sector. Appointments are for seven years and are not renewable. To safeguard the Authority's independence and autonomy, commissioners are expressly forbidden to have any direct or indirect professional relations with any company operating in the regulated sectors during their term in office and the subsequent four years.

(1) by law n. 239/2004. Previously the board of commissioners was made up of the President and two members (law n. 481/1995).

In what ways is the Authority autonomous?

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The Authority functions with full autonomy and independence of judgement within the general policy guidelines laid down by the Government and Parliament and taking into due account the relevant European Union legislation. In its Documento di Programmazione Economico-Finanziaria (Three-year Economic and Financial Planning Document), the Government draws the Authority's attention to any developments concerning the public utilities that it would be in the country's general interest to promote.

The Authority formulates observations and recommendations to the Government and Parliament and presents an annual report to Parliament and the Prime Minister on its activities and on the state of the regulated services.

The Authority formulates its own procedures for the adoption of provisions and enjoys organisational autonomy to lay down the regulations governing its internal organisation, functioning and accounting procedures.

The Authority is funded through annual contributions paid by the service providers, calculated as a set percentage of no more than 1/1000 of contributors' revenues for the previous financial year.

How long has it been operating?
Who are the Authority's members?

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The Authority was set up on 4 December 1996. It has been fully operational since 23 April 1997, when the internal rules governing its organisation, functioning and accounting were published in the Gazzetta Ufficale della Repubblica Italiana (Official Gazette) and it took over all functions within its remit that had previously been carried out by other public bodies.

The Commissioners, appointed by the Presidential Decree of 11 February 2011, are Guido Pier Paolo Bortoni, President and Alberto Biancardi, Luigi Carbone, Rocco Colicchio, Valeria Termini.

What are the Authority's main objectives?

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The task of the Regulatory Authority for Electricity and Gas is to pursue two main objectives as laid down in Law 481/95: "guaranteeing the promotion of competition and efficiency" while "ensuring adequate service quality standards" in the electricity and gas sectors.

These objectives are to be pursued by ensuring "uniform availability and distribution of services throughout the country, by establishing a transparent and reliable tariff system based on pre-defined criteria and by promoting the interests of users and consumers". The tariff system is required "to reconcile the economic and financial goals of electricity and gas operators with general social goals, and with environmental protection and the efficient use of resources".

What are the Authority's functions?

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Under law no. 481 of November 14th, 1995, the main functions of the Regulatory Authority for Electricity and Gas are as follows.

Tariffs

To set basic tariffs for the regulated sectors. This includes maximum prices net of tax, and tariff adjustments based on a price-cap mechanism (defined as a "ceiling on price variations on a multi-annual basis"). The price-cap mechanism sets a limit on annual tariff increases corresponding to the difference between the target inflation rate and the increased productivity attainable by the service provider, along with any other factors allowed for in the tariff, such as quality improvements.

Quality Standards

To establish guidelines for the production and distribution of services, as well as specific and overall service standards and automatic refund mechanisms for users and consumers in cases where standards are not met. To monitor quality standards set by the Authority, and the adoption and application of the Citizens' Service Charter. Quality standards may refer to both the terms and conditions of contracts (such as response time to calls or complaints) and technical aspects of the service (such as service continuity and safety).

Market structure

To formulate observations and recommendations to the Government and Parliament regarding the market structure and the adoption and implementation of European Directives.

Competition

To report to the Autorità garante della concorrenza e del mercato (Italian Antitrust Authority) any suspected infringements of Law 287 of 10 October 1990 by companies operating in the electricity and gas sectors.

Licensing

To make observations and recommendations to the Government and Parliament with regard to licenses or authorisations, and to the Ministry of Industry with regard to licensing, convention and authorisation schemes, and any changes to or renewal of the existing schemes.

Accounting and Administrative Unbundling

To issue guidelines for the accounting and administrative unbundling of the various activities under which the electricity and gas sectors are organised. Unbundling helps to achieve the objectives of transparency and standardisation in the annual accounts of companies operating in the regulated sectors, of monitoring the costs of individual services, and of ensuring that electricity and gas costs can be properly disaggregated and broken down by function to enable the effective promotion of competition and efficiency.

Monitoring and control

To monitor the conditions under which the services are provided, with powers to demand documentation and data, carry out inspections, obtain access to plants and apply sanctions, and to determine those cases in which operators should be required to provide refunds to users and consumers.

Complaints and appeals

To assess complaints, appeals and reports by individual users and consumers and their associations and, where necessary, to oblige service providers to modify service conditions accordingly.

Disputes

To handle out-of-court settlements and arbitrate in disputes between users or consumers and service providers.

Information and transparency

To publish and circulate information on the supply of the services to provide the maximum transparency, competitive supply conditions, and the possibility for intermediate and final users to make more informed choices.

How does the Authority operate?

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What is its decision-making process

The Authority's decision-making procedures are based on its internal regulations and regulations issued by Presidential Decree pursuant to Art. 17.1 of Law 400 of 23 August 1988, especially where procedures regarding individual interests and reconciliation and arbitration are concerned.

In adopting legislative or general provisions, the Authority initiates a process whereby it designates one of its officials to be responsible for all related procedures, and one of its commissioners to be responsible for reporting on any findings and on the proposed decision. Under this procedure a deadline is set for the submission of written observations and, where necessary, consultations may be arranged with the interested parties and their associations.

In the case of complaints, appeals, reports or other notifications from which it emerges that the Authority would have grounds to introduce individual provisions, the Authority operates according to criteria laid down by Presidential Decree 244/2001. These define the terms and arrangements for the opening of the procedure, the preliminary inquiries, any technical inspections, consultations or hearings, the conditions for the termination of the procedure and the adoption of the provision.

Transparency and consultation in the decision-making process

The Authority applies criteria of transparency when adopting general rules and decisions. The process involves full consultation with operators and the associations representing interested parties (consumer, environmental, trade union, and business associations) through the circulation of documents and the collection of written observations, discussed where appropriate during collective and individual hearings prior to the issuing of any provisions.

These hearings are governed by specific regulations which include the possibility for the associations to bring specific and urgent questions to the Authority's attention and to propose that these be included in the agenda for discussion.

Implementation of decisions

The Authority is required to publish its principal decisions and provisions in a Bulletin. General rules and provisions are also published in the Gazzetta Ufficiale della Repubblica Italiana (Official Gazette) and on the Authority's Internet site (www.autorita.energia.it).

Appeals against the Authority's decisions

Appeals against the Authority's decisions can be lodged with the Tribunale amministrativo regionale or TAR (Regional Administrative Court) for the Lombardy Region. Appeals against the rulings of the TAR can be presented to the Consiglio di Stato (Council of State).

The Authority in the international context

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The process of European integration and the realisation of the single market means that the supra-national policies and the coordination role of the EU bodies are of decisive importance for markets such as electricity and gas.

The Authority maintains bilateral relations with all the European regulators and in particular with the regulators of those countries sharing a border with Italy, by reason of the regulatory aspects of cross-border energy trade. It has also developed numerous contacts with new regulators or those currently being set up, especially in countries that have applied for EU membership and other European transition countries wishing to analyse the Italian model in closer detail.

Finally, the Authority cooperates with all the international bodies interested in the opening of the energy markets and in issues related to its institutional activities.