Italian electricity liberalization could have opposite effect

Mar 12, 2002 01:00 AM

Parliamentary amendments to an electricity decree designed to speed up electricity liberalization could have the opposite effect, Italy's energy regulator the AEEG said. Alongside the government's proposed version is that of the parliament: It is here that one finds provisions that could significantly reduce the effectiveness of that same directive, the AEEG said.

The regulator's reaction comes while parliament's senate house is debating possible amendments to the decree. In a reaction document the regulator contested:
-- A 2010 ENEL cap abolition date, saying caps could be removed only when effective competition was in place;
-- the application of extra capacity that ENEL must sell under the ruling -- at around 5,000 MW it should be applied to peak plants, as well as mid-merit plants to aid price definition and the launch of the power pool;

-- the extension of electricity distribution tariffs beyond 2003 as this would only benefit distributors;
The AEEG must remain in charge of key issues, such as creating the correct incentives for long-term capacity and the redistribution of grid investment, it said.

Under current proposals such responsibilities would be jointly handed over to the industry and finance ministry, a decision that makes no sense, and could create market uncertainty and paralysis in the sector, the AEEG said. The single supplier's role as electricity pool supplier to the captive market was also criticized for being too permanent a construct for a body that should disappear with effective competition.
But the AEEG approves of the decree's main objectives: it accelerates the power plant construction process; abolishes stranded costs and a hydro-electric tax; reunites grid management and ownership; strengthens a 50 % incumbent production cap.

Source: Platts
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