Operating review

Gas moved through the storage system

In 2016, 20.0 billion cubic metres of natural gas was moved through the storage system, an increase of 0.42 billion cubic metres, or +2.1%, compared with 2015 (19.58 billion cubic metres). The increase was mainly attributable to higher withdrawals from storage (+0.30 billion cubic metres, +3.1%) due to the substantial use of stocks by the operators during the final months of 2016, due mainly to weather conditions and to higher injections to replenish stocks (+0.12 billion cubic metres, +1.2%).

Natural gas moved through the storage system (billions of cubic metres)

Provision and development of storage services

Provision and development of storage services (GRI: G4-8)

In the 2016-2017 thermal year, the total space allocated was the same as that offered. Although allocation auctions were scheduled for the April-September period, all capacity offered had already been allocated at the auctions in May. Following the progressive entry into operation of the Bordolano deposit, two auctions were carried out, one in June with effect from July and the other in July with effect from August, during which 200 million standard cubic metres of capacity in addition to that offered at the start of the thermal year were offered and allocated.

Network codes list a number of indicators for monitoring the quality of service offered by the companies. Snam companies continued to maintain excellent performance with respect to these indicators in 2016. One part of these indicators, which refer to specific levels of commercial quality, gives rise to the automatic indemnification of customers in the event of failure to comply with the service quality standard.

The new balancing regime in implementation of Regulation (EU) No 312/2014, in force as of 1 October 2016, establishes the obligation of continuous activity for a 24-hour period only for the transporter. Considering that in Italy storage is the main tool enabling flexibility, Stogit immediately expressed its willingness to allow its customers continuous renomination cycles over a 24-hour period. The Authority placed importance on the role of storage in the 24-hour renomination cycles and also defined a system of daily “day-ahead” auctions for the marketing of storage capacities by Stogit and users (Resolution 193/2016/R/gas).

The Company therefore adjusted its information systems, which are still in the evolution phase to incorporate the latest regulatory instructions, and structured a commercial dispatching service over a 24-hour shift in order to guarantee operations and give users the required support.

In order to manage exchanges among operators and relationships with them, over time Snam has developed IT systems and web portals that now represent a unique feature of the Company that is upgraded regularly.

Organisational changes related to operational activities

During 2016, the number of personnel in service rose by 2, from 299 at 31 December 2015 to 301 at 31 December 2016.

In the Operations area, in the first half of 2016 the first phase of the SmartGas project was completed, an initiative aimed at revising maintenance standards and regulations, in order to ensure the necessary evolution of professional roles operating at the hubs and the development and implementation of more highly developed IT solutions to manage operating processes. Phase two of the project started in June.

With regard to sales, the launch of the new balancing system on 1 October 2016 entailed certain adjustments in the organisational structure (shift) responsible for the management of activities.

Accidents (GRI: G4-LA6)

The number of accidents increased in 2016 for employees, whereas they remained unchanged for contract workers.

Energy consumption and emissions (GRI: G4-EN3,EN15,EN21)

Activities aimed at reducing energy consumption and controlling atmospheric emissions continued.

In 2016, nitrous oxide emissions totalled 201 tonnes (+14.8% compared with 2015). The increase was due to the greater use of gas turbines, which entailed an increase in the use of fuel gas (+5.1%). The increasingly wide use of DLE turbines, which were employed for 88% of operating time, contributed to significantly limiting the increase in emissions.

Regulations concerning the business segment

Relations with the regulatory authority (No.) (GRI: G4-26)

Tariff regulations for 2016

By means of Resolution 46/2016/R/gas, published on 12 February 2016, the Authority provisionally approved the corporate base revenue for the storage service for 2016, as per the tariff proposal presented by Stogit on 22 January 2016. The provisionally approved revenue is aimed at providing a base figure for calculating the fees for the allocation of storage capacity. Subsequently, by means of Resolution 418/2016/R/gas, published on 22 July 2016, the Authority approved the definitive base revenue for the storage service for 2016 for the company Stogit. Revenue recognised for the natural gas storage service for 2016 amounted to €503.5 million. The RAB for storage activities was €4.0 billion.

Tariff regulations for 2017

By means of Resolution 441/2016/R/gas, published on 28 July 2016, the Authority determined the provisional base revenue for the storage service relating to 2017 for Stogit. The provisionally approved revenue is aimed at providing a base figure for calculating the fees for the allocation of storage capacity. By 31 May 2017, storage companies will submit their final base revenue proposals to the Authority, calculated using the total annual increases in assets relating to 2016. These proposals will be approved by the Authority within 60 days.

Other provisions

Ministerial Decree of 25 February 2016 (Official Gazette No 76 of 1 April 2016) – “Determination and allocation of modulation storage capacity for the contractual period 2016-2017”

With this decree, the Ministry of Economic Development defined the modulation storage space for the thermal year 2016 – 2017, to be used primarily for entities supplying domestic customers, at 7,450.5 million cubic metres plus the mining storage share not requested and allocated by the storage companies. The Decree confirmed that this storage space, together with that reserved for the uniform storage of annual and multi-year durations, would be allocated by competitive auctions, with the reserve price defined by the Authority on the basis of the criteria set forth in Resolution 77/2016/R/gas.

The Decree also modified the procedures for access to and delivery of the integrated storage and regasification service, previously introduced pursuant to Article 14 of Decree-Law 1/2012. In particular, this service, for which a storage capacity of 1 billion cubic metres is reserved, requires the regasification companies and the largest storage company to coordinate in order to allow redelivery of the regasified LNG to the user directly to storage, by the end of the month following the unloading of the tanker ships. Based on the provisions of the Decree, access to the service is obtained through a competitive auction whose price has been defined by the Authority on the basis of the criteria set forth in 77/2016/R/gas, taking account of the value of the product and the trend of the market.

Resolution 323/2016/R/gas – “Provisions on settlement relating to storage services for the 2016-2017 thermal year”

For the 2016-2017 thermal year, this resolution, published by the Authority on 17 June 2016, governs the way in which any differences are eliminated between the revenue recognised to storage companies on the basis of regulated tariffs and the revenue received following auctions for the allocation of capacity.

With reference to the γ parameter pursuant to Article 11 of Annex A to Resolution 531/2014/R/gas “Regulation criteria for natural gas storage service tariffs for the 2015-2018 period” – (RGST), relating to the coverage level of the portion of revenue relating to the additional return on net invested capital for the investments with incentive that entered into operation in the previous regulatory periods, an investigation was launched to define criteria for establishing its value for the coming years, with the goal of encouraging storage companies to pursue more efficient conduct in the management of allocation procedures as well as in the methods for providing the storage service.

Pending the outcome of the investigation, which will be completed in due time for the approval of corporate revenue for the year 2017, a γ parameter of 1 was confirmed for the year 2016.