Operating review

Introduction

The criteria for setting tariffs for the transportation, distribution and storage of natural gas, as well as for the regasification of LNG, are established by the Electricity and Gas Authority.

The table below shows the major pricing elements for each of the regulated activities carried out by Snam Rete Gas, on the basis of the regulatory framework as at 31 December 20097,

TRANSPORTREGASIFICATIONDISTRIBUTIONSTORAGE
Calculation of net invested capital recognised for regulatory purpose (RAB)
  • Re-valued historical cost
  • Re-valued historical cost
  • Re-valued historical cost
  • Parametric method for centralised revenues
  • Re-valued historical cost
Remuneration of net investment capital recognised for regulatory purposes (WACC pre-tax)
  • 6.7%
  • 7.6%
  • 7.6% (distribution)
  • 8% (metering)
  • 7.1%
INCENTIVES of new investments
  • 1% for 5 years (on investments in security)
  • 2% for 7/10 years (on investments in capacity development)
  • 3% for 10/15 years (on investments in entry capacity development)
  • 2% for 8 years (on upgrading existing terminals less than 30%)
  • 3% for 16 years (on upgrading existing terminals more than 30%)
  • 2% for 8 years (on subsitutions of cast-iron pipes and renewal of odorisation systems)
  • 4% for 8 years (on upgrading existing capacities)
  • 4% for 16 years (on development of new storage sites)
Efficiency factor (X FACTOR)
  • 2% on operating costs
  • 2% on ammortisation and depreciation
  • 3.5% on commodity components
  • 0.5% on operating costs
  • 3.2% on distribution operating costs
  • 3.6% on metering operating costs
  • 2% on operating costs
  • 1.5% on ammortisation and depreciation

The following sections show the key performance indicators for each business segment8. As indicated previously, the associated effects of consolidating Italgas and Stogit are recorded from 30 June 2009, the completion date of the transaction. For purposes of fully assessing operating performance in each business segment, the operating performance of the natural gas distribution and storage business segments is analysed with reference to the entire 2009 financial year. Comparative information is shown for 2008.

(7) It should be noted that new regulatory criteria for the natural gas transportation business segment came into force on 1 January 2010 for the third regulatory period (1 January 2010 – 31 December 2013). For more information on the regulatory framework for each business segment, see the relevant “Regulation” section.
(8) The business segments (natural gas transportation, LNG regasification, natural gas distribution and storage) are identified, in line with internal reporting, by management, and refer to the respective primary activities of Snam Rete Gas, GNL Italia, Italgas and its subsidiaries and Stogit.