ARERA electricity services activities Energy Infrastructures Operating Segment
Resilience of the electrical system in the development plans of distribution companies
Resilience is the ability of a system to quickly return to the initial situation after suffering a disruption. Resistance to stress and the ability to restore service even in emergency conditions are essential components of resilience. In the 5th regulation period 2016-2023 (see the Integrated Text of the output-based regulation of electricity distribution and measurement services (TIQE), the Regulatory Authority for Energy Networks and Environment (ARERA) is following up on several initiatives to promote an increase in the resilience of the electrical system and laid the foundations for further developments.
In fact, Resolution 31/2018/R/eel of 25 January 2018 updates the aforementioned TIQE, introducing obligations for the preparation of Resilience Plans for distribution companies. The Resilience Plan – which occupies a dedicated section in the Development Plan – must:
- have a horizon of at least three years;
- be processed in a coordinated manner with Terna and with the interconnected and underlying companies;
- include actions to contain the risk of disruption in the face of the critical risk factors, like flooding due to particularly intense rain, heat waves and prolonged droughts.
With Resolution 668/2018/R/eel of 18 December 2018 the Authority introduced an incentive mechanism for investments aimed at increasing resilience, focusing in particular on the resistance of distribution networks subjected to extreme weather events.
As anticipated by the Authority in consultation, projects with benefits greater than costs are eligible for a bonus, while all the projects present in the Resilience Plan of the DSO are subject to penalties.
More in detail, the bonus for each project – quantifiable as 20% of the net benefit of the project itself – will be reduced by 50% in the event that the effective completion date is postponed by six months compared to what was initially envisaged in the Plan. At the same time, the penalty associated with each project will be 10% of the costs actually incurred for the task if the effective completion date is postponed by 12 months compared to what was initially specified in the Plan, and 25% if the delay lasts 18 or more months. In the latter case, the DSO must justify the causes of the delay, describe the actions taken to recuperate the time lost and give an indication of any extra costs arising from the delay.
With regard to the operating procedures of the bonus/penalty mechanism, the resolution envisages that by 30 November every year from 2019 to 2024 the Authority will update and publish the list of the projects of each main DSO eligible for a bonus and/or penalty, and by 31 December of each year from 2020 to 2025 it will determine for each DSO the bonuses and penalties related to the projects with effective completion date in the previous year.
General system charges
The general system charges are specific cost items applied to electricity and natural gas bills in order to collect the sums necessary for financing various forms of incentives, like those to support Renewable Energy Sources (electricity sector) and the so-called Thermal Feed-in Tariffs (gas sector). Since these charges arise as ancillary components to the transportation fees, they are invoiced and collected by the distributors, which
must invoice them to the sellers, which – in turn – invoice them and collect them from the final customers. The payment to the system members, in particular the Energy and Environmental Services Fund (CSEA) and the Energy Services Manager (GSE), is made by the distributors. In the event of non-collection by the vendors from the final customers or by the distributors from the vendors, each party is in any case required to pay the amount due to the "party upstream". In the commercial relationship between distributors and vendors, the obligation of payment by the latter is supported by specific guarantees that must be issued to the distributor.
With Resolution 50/2018/R/eel of 1 February 2018 (Provisions relating to the recognition of charges that could not otherwise be recovered due to the failure to collect general system charges), the Authority introduced a mechanism to reinstate the general system charges paid but not collected by distributors and establishes:
- the conditions for access: it is envisaged that access to the mechanism will be given to any distributor that requests it and that fulfils the obligations of paying the general system charges starting from the receivables accrued from 1 January 2016, in relation to transport contracts terminated for non-compliance for at least 6 months;
- the recoverable amount: the amounts to be included both related to the charges incurred for any actions aimed at the collection of receivables and the receivables not collected identified by the ARERA, as well as the amounts to be excluded or considered reduced.
The procedural aspects and obligations set by the Energy and Environmental Services Fund (CSEA) are then defined for quantification and settlement of the amounts to be recognised to the companies.
Lastly, resolution 626/2018/R/eel of 5 December 2018, in which the Authority deferred the completion of the reform of the general system charges for domestic users to 2020, postponing the elimination of residual progressiveness from rates. Therefore, the two-scale structure remains in place for 2019 (up to 1,800 kWh/year and over 1,800 kWh/year).
Billing and measurements in the retail electricity market
For the complete implementation of the provisions contained in the 2018 budget law (Italian law no. 205/2017) regarding the phenomenon of maxi-bills (biennial consumption prescription) and in consideration of the relevant impacts of the law on the regulation in force, the ARERA started a complex procedure that should have been completed by 31 December 2018, but that is not yet complete.
Resolution 97/2018/R/com dated 22 February 2018 introduced the first measures necessary for the implementation of the 2018 budget law aimed at reducing the phenomenon. In particular, it established that:
- the seller is required to issue the billing document relating to adjustments made on the basis of corrections of the metering data within 45 days from the time the correction is made available within the Integrated Information System (IIS);
- at the time of first application the legislation's scope of application is limited to low-voltage domestic and non-domestic end users;
- together with the issuance of the bill and in any case at least 10 days in advance with respect to the expiry of the payment terms, the seller is obliged to inform the customer of the possibility of objecting to the limitation period of the claim.
On 13 April 2018, with resolution 264/2018/R/com, the Authority intervened again on the matter, temporarily establishing that in the event of non-collection due to the objection to the limitation period raised by the end customer, for the cases relating to adjustments deriving from corrections attributable to the distributing company, the seller is entitled to request a restatement of the amounts, the reversal of the transport invoices and the restitution of any amounts paid in excess.
Finally, on 13 November 2018, with consultation 570/2018/R/com, ARERA started defining responsibilities in cases where the billing delay is attributable to the operator (seller/distributor) or is consequent to failure or incorrect collection of consumption data attributable to the end customer.
Update of Distribution and Measurement, Connection and Transport Tariffs.
With resolutions 150/2018/R/eel dated 15 March 2018 and 174/2018/R/eel dated 29 March 2018, the Authority determined the definitive tariffs of reference for the year 2017 for the Distribution service and for the electricity measurement service, respectively. For areti, the fixed rate payments are higher than those determined provisionally and made known in resolution 286/2017/R/eel.
With the resolutions of 29 March 2018 175/2018/R/eel and 176/2018/R/eel, the Authority determined the provisional tariffs of reference for the year 2018 for the Distribution service and for that of the Measurement of electrical energy, respectively.
Resolution 670/2018/R/eel of 18 December 2018 - Update of the tariffs for the supply of the electricity transmission service for the year 2019 and decisions regarding the requests for incentives for specific projects with high risks, updates the 2019 fees for the electricity taken by the distribution companies from the national grid pursuant to art. 14 of the TIT.
On the other hand, with resolution 671/2018/R/eel of 18 December 2018 were updated for 2019 the mandatory tariffs for the electricity distribution and meter reading services for non-domestic customers and economic conditions for the provision of the connection service Furthermore, the provision:
- envisages the extension to 31 December 2019 of the deadline for the definition of tariff regulation criteria for use and injection of power and reactive energy at the high and very high voltage junctions;
- extends to 31 December 2019 the reduction in charges for domestic customers who wish to change the level of contractually committed power as set out in article 8-bis of the TIC.
Finally, with Resolution 673/2018/R/eel dated 18 December 2018, the Authority updated the 2019 tariffs for the supply of electrical grid services (transmission, distribution and measurement) for low voltage domestic customers, specifically the mandatory TD tariff reserved for them.
Smart Meter 2G
The Authority continues to focus on the topic of Smart Meter 2G, with the publication of the consultation document 245/2018/R/eel of 11 April 2018 which illustrates the Authority's guidelines on the definition of the functional specifications for the "2.1" version of second-generation meters. Specifically, the guidelines concern: the possible definition of a complementary channel on chain 2 for sending information to the end user, the possibility of remote reinitialisation in the event of excess power, the possibility of displaying removal readings, the possibility of evaluating the achievement of certain threshold values set by the seller, the methods for implementing pre-paid offers.
Furthermore, with Resolution 419/2018/R/eel of 2 August 2018 the Authority defined criteria for the recognition of measurement costs for low voltage electricity linked to the installation of 2G meters before starting the plan of mass installation envisaged by provision 646/2016/R/eel.
In particular, the ARERA:
- confirmed the rules for recognising capital expenditures also in force for the 1G investments that will come into operation in 2019, providing that the maximum value recognisable per meter will always be equal to 105% of the corresponding value for 2015;
- introduced a new transitional mechanism for investments in 2G installed by the companies in the years 2018 and 2019, before the start of the mass replacement plan, such that the maximum recognisable expense per 2G meter will be equal to the sum:
- of 125% of the average unit expenditure incurred in 2015 for the procurement of 1G meters,
- of 105% of the investment per meter net of the average expenditure for the supply of installed meters incurred in 2015.
The changes respond to the difficulties of some DSOs finding 1G meters that are no longer in production and to the simultaneous need to start supplying 2Gs before submitting the request for admission to the recognition of specific investments (RARI) to the Authority.
Reclamation of antiquated upright columns
The Consultation document 331/2018/R/eel dated 14 June 2018 contains the Authority's guidelines aimed at encouraging the reclamation of old upright columns and illustrates mechanisms that can facilitate the acquisition of the necessary authorisations by the distribution companies for intervening on private property.
The aim of the Authority is to define a standard unit cost for the construction works connected to the intervention, based on the value of the building's finishes and the following parameters:
- cost per building (fixed intervention costs);
- variable cost (based on the extension of the building) to be calculated according to the number of users affected by the reclamation;
- any other parameters (like the existence of architectural or historical constraints).
TEE Energy Efficiency Certificates: determination of the tariff contribution
With provision 487/2018/R/efr of 27 September 2018, the Authority updates the criteria for determining the tariff contribution paid to distributors complying with energy saving obligations, in consideration of the changes introduced by interministerial decree of 10 May 2018, updating the previous interministerial decree of 11 January 2017, as well as the changes in the mechanism made in recent years.
As a result of the resolution, the update of the Regulations for bilateral transactions and the TEE Market Rules was approved, as proposed by GME (Resolution 501/2018/R/efr).
Sanctioning procedures concluded
With a sentence of 22 February 2018, the Council of State completely voided the penalty on the grounds that, as correctly found by areti, the regulation then in force did not include any obligation to register the reminders following a first notification already recorded for the same customer. In fact, with Resolution 512/2013/S/eel, which followed VIS 60/11, the Authority ordered the imposition of a pecuniary administrative sanction equal to € 517,000 against areti for a violation concerning the registration of disruptions of the electricity distribution service. In particular, the violation concerned the obligations envisaged in the previous TIQE (2011-2015) of:
- using a register to document the beginning of long unannounced disruptions originating on the low voltage network by noting the date, time and minute of the first alert – even by telephone call – of the disruption;
- record all calls received reporting malfunctions, even if there is no disruption in service.
With respect to these two claims, the Authority proceeded with the violation relating to the failure to record all calls, including reminders.
On 13 January 2014, areti filed an appeal with the Lombardy Regional Administrative Court, which partially upheld the request to cancel the sanction, reducing areti's fine to € 50,000. In essence, while confirming the existence of the infringement, the judges found that the ARERA had limited itself to indicating the size of the sanction without providing adequate reasons for its quantification.
With subsequent resolution 14/2016/C/eel, the Authority decided to file an appeal with the Council of State against the sentence of the Lombardy administrative court, which had decided in areti's favour.
With another resolution 300/2018/S/e, ARERA ordered a pecuniary administrative sanction of € 906,000 against areti for violations concerning the commissioning of electronic meters. Initiated with resolution VIS 62/2014/S/eel, the procedure derives from a communication sent by the company to ARERA, in response to a request, which showed that, unlike the provisions of Resolution 292/2006 on the date of 30 June 2013, the percentage of meters put into service compared to the total of low voltage PODs with available power lower than 55 kW was equal to 89.9%, below the threshold required by the regulation (95%).