SNAM Annual Report 2016 - Applicable rate framework and principal developments

Applicable rate framework and principal developments

By means of Resolutions 514/2013/R/gas, 438/2013/R/gas and 531/2014/R/gas, the Authority defined the tariff criteria for the fourth regulatory period, in force from 1 January 2014, for transportation and regasification activities, and from 1 January 2015 for storage activities.

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Fourth regulatory period
Transport	4 years	January 2014	December 2017
Regasification	4 years	January 2014	December 2017
Storage	4 years	January 2015	December 2018

The following graphic shows the main tariff components for each of the regulated activities carried out by Snam, based on the regulatory framework in force as at 31 December 2016. Further information regarding major new rate developments that occurred in 2016, with respect to each business sector, is provided in the chapter “Business segment operating performance – Tariff regulations” of this Report.

TRANSPORT

REGASIFICATION

STORAGE

(*)

The rate of return on net invested capital (WACC) in force for the year 2016 was set by the Authority by means of Resolution 583/2015/R/com of 2 December 2015, “Rate of return on invested capital for infrastructural services in the electricity and gas sectors: calculation and updating criteria”. The duration of the WACC regulatory period for infrastructure regulations in the gas sector is set at six years (2016-2021), and a mechanism is provided for updating the rate at mid-period according to the prevailing situation.

(**)

Approved by Resolution 27/2016/R/gas, published on 29 January 2016, in which the Authority gave final approval to the applicable revenue from storage activities for the year 2015.

End of Regulatory Period (TARIFFS)

31 December 2017

31 December 2018

Computation of Net Invested Capital Recognized for Regulatory Purposes (RAB)

Revalued historical cost

Revalued historical cost
Deduction of replacement costs

Return on net invested capital recognized for regulatory purposes (pre-tax WACC)

6.3% Year 2015
5.4% Years 2016-2017 (*)

7.3% Year 2015
6.6% Years 2016-2017 (*)

6.0% Year 2015
6.5% Years 2016-2018 (*)

Incentives on new investments

+1% for 7 years (regional system expansion investments)
+1% for 10 years (national system expansion investments)
+2% per 10 years (expansion investments at points of entry)

+2% per 16 years
(new terminals or expansion of the capacity of existing terminals >30%)

20% withholding for 8 years on earnings higher than recognized earnings generated by tender procedures

WACC +1% on new investments made after 31 December 2013 as regulatory time-lag compensation

WACC +1% on new investmentsmade after 31 December 2013 as regulatory time-lag compensation

Return on Investments
t-1 as regulatory time-lag compensation (since 2014)

Efficiency Factor (X FACTOR)

2.4% – on operating costs

1.4% – on operating costs (**)

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