Applicable regulatory framework and principal developments

Tariff regulation in Italy

By means of Resolutions 514/2013/R/gas, 438/2013/R/gas and 531/2014/R/gas, the Italian Regulatory Authority for Energy Networks and the Environment (ARERA) 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. Through subsequent resolutions 575/2017/R/gas, 653/2017/R/gas and 68/2018/R/gas the Authority defined the tariff criteria for the transition period, respectively for transportation and regasification activities (1 January 2018-31 December 2019) and for storage activities (1 January 2019-31 December 2019) concluding the fourth regulatory period.

In 2018 the Authority launched consultations for the definition of the criteria for calculating the revenue recognised for the fifth regulatory period with effect from 2020, defining these criteria in 2019.

Through subsequent resolutions 114/2019/R/gas, 474/2019/R/gas and 419/2019/R/gas the Authority defined the tariff criteria for the fifth regulatory period, respectively for transportation and regasification activities (1 January 2020-31 December 2023) and for storage activities (1 January 2020-31 December 2025) confirming the essential stability and continuity of the regulatory principles for the regulation in force.

The following are the primary tariff components for each of the regulated activities carried out by Snam, based on the regulatory framework in force as at 31 December 2019. Further information regarding major new rate developments occurred, with respect to each business sector, is provided in the chapter “Business segment operating performance – Tariff regulations” of this Report.

Regulation in European countries of interest to Snam: main features

TAG GCA Transportation

• Differentiated RAB between Revalued Historical Cost and Book Value. There is also different treatment of (pre-2012) old assets and new investments.
• There are differentiated remuneration rates for the share of RAB financed through Equity (Cost of Equity (*) 8.92% Actual Pre-Tax) and for the share financed through Debt (Cost of Borrowing 2.7% Pre-Tax Nominal).
• Revision in progress of regulatory parameters for the fourth period (2021-2024).

Terēga Transportation

• RAB revalued annually using inflation (Consumer Price Index) taking into account new investments and amortisation and depreciation (Current economic cost method);
• WACC return rate equal to 4.25% Actual Pre-Tax.

Terēga Storage

• Storage under regulated system from January 2018.
• WACC return rate equal to 4.75% Actual Pre-Tax; RAB around €1.2 billion.

IUK Transportation

• Exemption system until October 2018;
• Switch from an exemption regime to a regime regulated on the expiry of long-term contracts (October 2018).

TAP Transportation

• Third-Party Access exemption on the initial capacity (10 bcm/y);
• Exemption from tariff regulation on the initial and expansion capacity.

DESFA Transportation/LNG

• RAB based on historical cost, Work in Progress remunerated by WACC.
• Nominal Pre-Tax remuneration rate for the period 2019-2022: 8.22%, 7.84%, 7.52%, 7.44%.
• RAB of around €0.8 billion (Transportation + LNG).
• Socialisation of the cost of LNG in the transportation tariff (50% from 2020 – compared with 75% previously).
• Recovery of the OLD Recoverable Difference accumulated between 2006 and 2016 of around €326 million, over a time frame of 16 years from 2017 to 2032.