Tariff regulations and other provisions
Resolution ARG/gas 119/10 – “Consolidated act on the regulation of the quality and the tariffs for natural gas storage services for the 2011-2014 period (TUSG): approval of part II “Regulation of natural gas storage service tariffs for the regulatory period 2011-2014 (RTSG)”, measures on the transitory fee for the gas transportation metering service for 2011”
With this resolution, published on 5 August 2010, the Electricity, Gas and Water Authority issued the criteria for calculating storage tariffs for the third regulatory period (1 January 2011 – 31 December 2014).
The valuation of the net capital invested (RAB) is based on the revalued historical cost method. The return rate of net capital invested (WACC) is set at 6.7%, in real terms, before taxes.
The greater returns for new investments were confirmed and provide for a higher return compared to the base rate (WACC), amounting to 4% for a period of eight years for extending existing capacities and for a period of 16 years for developing new fields. The revenue associated with new investments is recognised from the second year following the one in which the costs were incurred (“spending”) and are guaranteed regardless of the volumes of gas transported.
The method for updating the price cap tariffs is applied only to revenue relating to operating costs and is equal to approximately 18% of the revenue in question, which is updated for inflation and decreased by an annual recovery coefficient set at 0.6%. The revenue components which are related to returns and amortisation and depreciation are determined on the basis of the annual update of net capital invested (RAB). Specifically, in the third regulatory period, the amortisation and depreciation is subtracted from the price-cap mechanism.
With this resolution, for the purposes of applying the tariffs, the calendar year is taken as a reference rather than the thermal year and the single tariff is confirmed nationally along with the revenue equalisation mechanism.
Resolution 85/2014/R/gas – “Provisions for the allocation of storage capacity for the 2014-2015 thermal year for storage”
The Authority used this resolution, published on 28 February 2014, to govern the organisation of tenders for the allocation of storage capacity for the 2014-2015 thermal year based on the provisions of the Decree of the Ministry of Economic Development of 19 February 2014, “Modulation storage capacity allocation methods, 1 April 2014 – 31 March 2015”, to amend the procedures for determining the services available to users during the injection phase, and to make provision for certain interventions relating to the storage capacity allocated pursuant to Legislative Decree 130/10.
Specifically, the resolution makes provision for four tenders per month, from March to September 2014, to allocate capacity for the leading, uniform modulation service. The resolution also provides that users can make available to Stogit, for allocation to third parties, the service capacities to which they are entitled pursuant to Legislative Decree 130/10.
Resolution 144/2014/R/gas – “Provisions on storage capacity financed pursuant to Legislative Decree 130/10”
With this resolution, published on 31 March 2014, the Authority defined the criteria for recalculating the unit access fee pursuant to Resolution ARG/gas 29/11 for the 2013-2014 thermal year for storage.
Resolution 295/2014/R/gas – “Provisions on settlement relating to storage services for the 2014 – 2015 thermal year”
For the 2014-2015 thermal year, this resolution, published by the Authority on 23 June 2014, governs the way in which any differences are eliminated between the revenue recognised by storage companies on the basis of the tariffs approved through Resolution 350/2013/R/gas and those recognised following tenders pursuant to Resolution 85/2014/R/gas.
This mechanism, for the period 1 April 2014 to 31 March 2015, is the same as the one activated by the Authority for the previous year through Resolution 121/2013/R/gas, with the added recovery of revenues arising from the failure to apply the variable storage fee on volumes injected into the network, which Resolution 85/2014/R/gas set at zero starting from 1 April 2014.
Resolution 531/2014/R/gas – “Regulation criteria for natural gas storage service tariffs for the 2015-2018 period”
With this resolution, published on 31 October 2014, the Authority issued the criteria for defining storage service tariffs applicable in the fourth regulatory period (1 January 2015 – 31 December 2018).
The valuation of the net capital invested (RAB) is based on the revalued historical cost method. The capital invested is calculated with reference to the fixed assets recorded in the financial statements at 31 December t-1 (instead of 31 December t-2) in order to reduce the effect of the regulatory time lag. Fixed assets under construction relating to investments realised by 31 December 2014 may be included in the calculation of RAB. As of 1 January 2015, the calculation of RAB takes into account only realised investments, inclusive of interest expense on assets under construction. The return rate (WACC) of net capital invested for 2015 is set at a real rate of 6% before taxes. A revision of the WACC starting from 2016 is also planned via an update of the return on risk-free assets (average for September 2014 – August 2015) whilst keeping all other parameters unchanged.
For investments realised by 31 December 2014, the incentives in force in the second and third regulatory periods (4% for a period of 8/16 years) will continue to apply. Investments related to the building of additional capacity (on top of what is set forth in the plan under Legislative Decree 130/10) will earn, for eight years, a proportion (20%) of any revenue exceeding that generated from allocating the capacity through auction.
The method for updating the price cap revenue is applied only to the component relating to operating costs, which is updated for inflation and reduced by an annual recovery coefficient, to be set by the Authority in a subsequent order. The revenue components which are related to returns and amortisation and depreciation are determined on the basis of the annual update of net capital invested (RAB). As in the third regulatory period, the amortisation and depreciation is subtracted from the price-cap mechanism.
A guarantee mechanism will continue to apply to total base revenue.
The regulations governing the setting of fees for the storage service were defined by Authority Resolution 49/2015/R/gas, while the definitive RAB and base revenue pertaining to Stogit for 2015 will be determined with a subsequent order, to be issued by the Authority by 31 July 2015. The 2014 storage service fees and the relevant equalisation mechanisms will continue to apply until the end of the 2014-2015 storage thermal year. The fees determined pursuant to Resolution 49/2015/R/gas will be applicable from 1 April 2015.
On 24 December 2014, Stogit S.p.A. filed an appeal with the administrative courts against Authority Resolution 531/2014/R/gas, with reference in particular to the recognition of the greater return on net invested capital for investments realised by 31 December 2014, with the exception of fixed assets under construction.
Resolution 586/2014/R/gas – “Launch of proceedings for the formation of provisions on regulatory mechanisms for the development of additional national gas system storage point services”
With this resolution, published on 28 November 2014, the Authority launched proceedings to define mechanisms to incentivise the development of additional storage point services.
Consultation document 656/2014/R/gas of 23 December 2014 – “Regulatory mechanisms to incentivise the development of additional national gas system storage point services”
With this consultation document, the Authority set forth its guidelines on procedures for determining incentives for the realisation of additional delivery point capacity services within the storage system, which will apply to investments realised as of 2015.
Law No. 9 of 21 February 2014 – Conversion into law, with amendments, of Decree Law 145 of 23 December 2013
Law No. 9/2014, converting Decree Law No. 145/2013 (known as “Destination Italy”), stipulates that the industrial investors mentioned in Legislative Decree 130/10 must inform the Ministry of Economic Development of their desire to maintain investment in the development of new storage capacity pursuant to said Legislative Decree within 60 days of the Law’s issuance. Pursuant to the aforementioned Law, a tender procedure has also been launched for the allocation of new storage capacity, which is reserved for the electricity-generating companies mentioned in Legislative Decree 130/10.
Stogit is obliged only to create new storage capacity in the quantities specified by the industrial investors and allocated to electricity-generating companies during the tender.
There was no request for storage capacity for the thermoelectric sector following the tender conducted by Stogit, while only one industrial investor expressed a desire to maintain investment in the development of physical storage capacity for the additional amount of 3.7 million standard cubic metres.
As a result, the volume of new capacity was reduced from the expected 4 billion cubic metres to the present 2.6 billion cubic metres.
Ministerial Decree of 19 February 2014 – Modulation storage capacity allocation methods, 1 April 2014 – 31 March 2015 (Official Gazette No. 50 of 1 March 2014)
The Ministry of Economic Development used this decree to set the modulation storage capacity for the thermal year 1 April 2014 – 31 March 2015 at approximately 6,950 million cubic metres, to be allocated as a priority (50% of said capacity) to entities directly or indirectly supplying civilian customers. The decree provides for this capacity, together with additional available storage capacity of approximately 1,610 million cubic metres, to then be allocated by way of tenders held throughout the injection period.
The Ministerial Decree also states that 500 million cubic metres of natural gas storage capacity shall be allocated to industrial companies and their consortia, to enable them to offer integrated regasification services aimed at ensuring the direct procurement of LNG from abroad.
Post-balance sheet events
Resolution 51/2015/R/gas – “Approval of company storage service revenue for 2015”
With this resolution, published on 13 February 2015, the Authority provisionally approved the core storage service revenue for 2015. The provisionally approved revenue is intended to constitute a reference value that will be used to calculate the storage capacity allocation fees. By 31 May 2015, storage companies will submit to the Authority their definitive core revenue proposals, as calculated using the final annual asset increases for 2014. These proposals will be approved by the Authority within 60 days.