Significant events for the 2018 financial year
Commercial and Trading Operating Segment
Acea Energia is responsible for performing the “Energy Management” necessary to Group operations, particularly with regard to sales and production. The Company also liaises with the Energy Market Operators (GME) and with TERNA. In relation to the institutional entity Terna, the Company is the input Dispatch User for Acea Produzione and other companies in the Group. It performed the following main activities in the period:
- the optimisation and assignment of electricity produced by the Tor di Valle and Montemartini thermoelectric plants and by the S. Angelo hydroelectric plant,
- the negotiation of fuel procurement contracts for the power generating plants,
- the procurement of natural gas and electricity for the sales company to sell to end customers,
- the optimisation of the supply portfolio for the procurement of electricity and management of the Energy segment companies’ risk profile.
In 2018 Acea Energia purchased electricity from the market for a total of 11,321 GWh, of which 9,509 GWh through bilateral contracts and 1,813 GWh through Borsa, for resale to end customers of the free market and for the optimisation of energy flows and the purchasing portfolio.
As regards the sales market, the refocusing of Acea Energia's sales strategy continued in the period with a more capillary and attentive selection of customers which tends to favour contracting small (residential and micro business) customers.
In 2018, Acea Energia sold electricity on the Protected service for a total of 2,344 GWh, with a 11.6% reduction on a trend basis. The number of withdrawal points totalled 831,236 (893,319 at 31 December 2017). Sale of electricity on the Free Market amounted to 3,323 GWh for Acea Energia and 362 GWh for the sales Joint Venture, for a total 3,685 GWh, a decrease of 12.1% compared to last year. The reduction mainly concerned the B2B segment and derives from a strategy of consolidation in the small business and mass market segments.
In addition, Acea Energia and the other sales companies of the Group sold 128.3 million Sm3 of gas to end customers and wholesalers which involved 172,755 re-delivery points, while at 31 December 2017 they were 167,371.
With regard to the proceedings started by the Antitrust Authority, the main updates are described below:
Proceeding PS9815 of the AGCM antitrust authority for unsolicited activations: the Court of Justice suspended the discussion of the judgement in question, pending the definition of the preliminary questions raised by the Council of State in a different ruling, with reference to the application of the Directive on unfair commercial practices in the electronic communications sector.
The Court of Justice has not accepted the request of the Lazio Regional Administrative Court to implement an "accelerated" procedure for the settlement of the preliminary question.
Proceeding PS9354 of the AGCM antitrust authority for unfair commercial practices: on 7 December 2017 the AGCM replied with an acknowledgement of Acea Energia's measures to comply with the Authority's sanctions, deeming them substantially adequate. In this regard, the Authority requested a report no later than 30 June 2018 regarding the measures definitively taken by that date to complete implementation of the Acea 2.0 System, for full compliance with the above-mentioned sanctions.
On 2 July 2018 Acea Energia submitted the report requested by the antitrust authority concerning the definitive measures implemented by the Company at 30 June 2018 in compliance with the provision in question.
On 24 September 2018, the Company received a new request for information formulated by the antitrust authority in response to the last Acea Energia note containing the description of the measures to comply with the provision implemented by the Company. In particular, the authority requested by 24 October 2018 further indications regarding the handling of the adjustment/recovery invoices, inclusive of fully or partially prescribed consumption.
The AGCM antitrust authority focused on the new aspects introduced by Italian Law no. 205 of 27.12.2017 as well as the resolutions of ARERA 97/2018/R/COM and 264/2018/R/COM regarding the limitation period for the payment of electricity and gas consumption, and asked the Company to specify the impact of this changed regulatory framework on the functionality of the Acea 2.0 System regarding the processing of invoices inclusive of consumption limitation periods. On 24 October 2018 the Company responded to the aforementioned AGCM request regarding the impact of the changed regulatory and regulatory framework in light of Italian Law no. 205 of 27.12.2017 and of the deliberations of ARERA 97/2018/R/COM and 264/2018/R/COM on the subject of consumption limitation periods.
Proceeding A513 of the AGCM antitrust authority for abuse of a dominant position: on 18 January 2018, with the support of the Guardia di Finanza, the AGCM carried out another audit at the offices of Acea Energia S.p.A. in Piazzale Ostiense 2 and in Viale dell'Aeronautica 7, as well as at the registered office of Acea S.p.A. and at the registered office of Areti S.p.A.
During the inspection the Authority served the aforementioned companies with a provision of objective and subjective extension of the A/513 procedure. Specifically, the antitrust authority deemed it necessary to extend the investigation both objectively with regard to the availability and exploitation by Acea Energia of inside information and subjectively to the electricity distribution company areti S.p.A., vertically integrated with Acea Energia, as a party that transfers this information to the sister.
During the audit, the officers in charge of the AGCM examined corporate documents both in paper form and in electronic format considered relevant in light of the aforementioned extension of the procedure, extracting a copy and requesting oral information concerning the subject matter of the proceedings from employees of the companies involved.
On 9 February 2018, following the extension granted by the AGCM, Acea Energia filed an application for confidentiality pursuant to art. 13, paragraph 7 of Italian Presidential Decree no. 217/98 regarding the documents acquired during the audit.
Having submitted a request to access the deeds and this having been upheld by AGCM, Acea Energia and Acea S.p.A. were able to examine the additional documents relative to these proceedings.
On 3 August 2018 the antitrust authority served the companies involved with a Communication of Preliminary Results (hereinafter CPR), document in which the authority renders its preliminary findings official based on the information gathered during the Procedure, and, for the purposes of the assessment of the violations of article 102 of the TFEU, identifies (i) the relevant markets, (ii) the existence of the dominant position of the companies of the Acea Group, (iii) the abuse of said dominant position, (iv) the severity and duration of the abuse of dominant position. From this CPR it emerges that the authority challenges the entire Acea Group to pursue a commercial/industrial strategy aimed at governing the "emptying" of its protected market customer base through the unlawful exploitation of irreplicable prerogatives deriving directly from the performance in a legal monopoly both of the distribution activity and of the activity carried out as the operator of the Enhanced Protection Service in the areas of the Municipalities of Rome and Formello.
The conduct identified by the Authority as instrumental to the pursuit of this purpose would be:
- the Group's use of discriminatory methods to acquire privacy consent for the contact data of SMT customers and their use for commercial purposes on the free market (an infringement that allegedly occurred from March 2014 until December 2017);
- the Group's use for commercial purposes of sensitive information regarding the market positioning of its main competitors that was exclusively available to areti (an infringement that allegedly started in February 2016 for data on an annual basis, and in October 2016 on a monthly basis at least until August 2017).
The Authority concluded that the aforementioned conduct – contested by the three companies (Acea S.p.A., areti and Acea Energia S.p.A.) – was intended to exploit the dominant position held by the Acea Group companies (in the distribution and sale of electricity) in order to maintain the market position of the Acea Group sales company, also following the imminent repeal of the enhanced protection regime, and constituted a very serious breach of the regulations for the protection of competition.
The Authority defined some corporate and strategic choices of the Acea Group as "consistent with abusive objectives" consonant with the disputed conduct, increasing its serious nature. These choices would be as follows:
- organisational/corporate evolution of the Acea Group in the electricity sector;
- industrial commercial strategy planned by the same Group to deal with the planned changes in the market of energy sales;
- the characteristics/potential of the Acea Group's information systems;
- the unitary management of electricity sales activities;
- the electrical services sales organisation used by AE.
On 15 November 2018, Acea Energia, together with Acea S.p.A., filed the final brief and related attachments, including the "Economic Opinion on the alleged conduct of Acea Energia S.p.A., as part of proceeding A/513" prepared by Officina Economica.
On 20 November 2018 the final hearing of the proceedings was held. The Group filed briefs and defensive documents whose main points were as follows:
- the reconstruction of the actual scope of the Group's disputed conduct (acquisition of privacy consent for commercial purposes) and of its concrete exclusionary effect on the market in order to demonstrate the negligible materiality, and therefore its substantial ineffectiveness;
- the assessment of the informational advantage that Acea Energia would have benefited from, taking advantage of the information that Areti allegedly made available to it (market shares of Acea Energia's competitors in the free market), in order to demonstrate its substantial irrelevance;
- the critical examination of the empirical evidence presented by AGCM about the alleged "differential capacity" of Acea Energia to attract users from the Protected Service to the Free Market, from which it allegedly benefited thanks to the disputed conduct in the CPR, in order to demonstrate its inexistence.
On 8 January 2019 the AGCM antitrust authority notified the Company of the final Order of Procedure A/513. In this order, the Authority ruled that Acea S.p.A., Acea Energia S.p.A. and areti S.p.A. had committed an abuse of a dominant position – qualified as very serious and of duration quantified in 3 years and 9 months – consisting in the adoption of a broad exclusionary strategy realised through the illegitimate use of a series of prerogatives possessed solely by virtue of its position as an integrated operator in distribution, in order to compete with its competitors in the acquisition of electricity sales contracts in free market conditions.
In view of the gravity and duration of the infringement, the Authority ordered Acea S.p.A., Acea Energia S.p.A. and areti S.p.A. to pay an overall pecuniary administrative fine of € 16,199,879.09. In consideration of the fact that the preliminary investigations made it possible to ascertain that the disputed conduct fell within the more general context of the strategic plan defined and controlled at the Parent Company level, and, nevertheless, the two commercial companies involved carry out their activities under the direction and coordination of Acea S.p.A., and, finally, since the Authority did not define the amount of the fine for each individual entity, the entire amount was recorded in the financial statements of the Parent Company.
The Company is considering filing an appeal with the regional administrative court against the aforementioned fine, and, at the same time, is assessing the measures to be implemented in compliance with the provisions of the AGCM.
Proceeding PS9974 of the AGCM antitrust authority for unfair trade practices: on 30 May 2018, the AGCM served a note (also called "Moral Suasion") to Acea S.p.A. concerning an invitation to eliminate any possible commercial misconduct pursuant to art. 4, paragraph 5 of the "Regulation on preliminary investigations concerning misleading and comparative advertising, unfair trade practices, violations of consumer rights in contracts, violation of the prohibition of discrimination and unfair terms". In fact, the Authority noted that it had received complaints from consumers and micro-enterprises regarding the conduct of certain operators in the sector that during transfer or takeover of the utilities would only activate the supply if the new party agreed to pay any outstanding amounts (so-called "past arrears") from the previous holder of the supply contract. Therefore the AGCM requested that within 30 days from receipt of said note elements be produced demonstrating that the procedure implemented by the company, in the event of request for transfer or takeover in the case of previous arrears, does not involve any request for payment by the new party or an unjustified delay in the fulfilment of the necessary obligations. The Authority also requested to explicitly specify in the Contractual Conditions, on the website and in the FAQs the procedure adopted and any documentation required to comply with the request for transfer or takeover.
On 2 July 2018, Acea Energia, as the company of the Acea Group that deals with the sale of electricity to end users with respect to which the activities of "Moral Suasion" seems to have been reported, submitted a timely acknowledgement to the AGCM regarding the requests made by the Authority.
On 26 September 2018, the Company was notified by the antitrust authority of the outcome of the procedure concerning the invitation to eliminate possible improprieties in its commercial conduct, pursuant to art. 4, para. 5 of the "Regulations on preliminary procedures concerning misleading and comparative advertising", which had been served to the company on 30 May 2018.
The authority decided to dismiss the requests for action because the activities put in place by the company are considered sufficient to eliminate any commercial improprieties under investigation.