07 2018
LOCAL TENDERS FOR THE CONCESSION OF GAS NETWORKS: PROBLEMS, OUTLOOK, AND NEW MEASURES TO “SALVAGE” THE SECTOR by Tiziana Fiorella Gianluigi Delle Cave
THE AUTORS Tiziana FIORELLA – Associate Partner, Rödl & Partners Gianluigi DELLE CAVE – Junior Associate, Rödl & Partners
The LAW FIRM RöDL & PARTNERS, founded in 1977, was one of the first in Europe to form a single pool of professionals with the expertise of attorneys, tax consultants, and auditors. Its international development coincided with a rapid affirmation in Italy, strategic country in the Rödl galaxy. In 1998 it opened its first office in Milan, followed in the 2000s by Padua, Rome and Bozen, for a total staff of over 100. http://www.roedl.net
ENERGIA MEDIA Energia Media is a communication and public relations agency operating mainly in the energy, utility and smart city, and smart land sectors. It develops communication strategies, facilitates relationships, and processes content and information. www.energiamedia.it All images and photographs included in this document have been correctly purchased from data bases. Should the author believe that copyright rules have been violated, he is requested to contact the following address: comunicazione@energiamedia.it
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07 2018
LOCAL TENDERS FOR THE CONCESSION OF GAS NETWORKS: PROBLEMS, OUTLOOK, AND NEW MEASURES TO “SALVAGE” THE SECTOR by Tiziana Fiorella Gianluigi Delle Cave
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The energy sector in Italy plays a strategic role in the country's politics. Natural gas, in particular, has thus far been considered among the decisive energy sources for the development of energy Made in Italy, for the benefit of this resource in terms of environmental impact and the goal of decreasing the domestic consumption of petroleum and nuclear power. The distribution of natural gas, specifically, is defined by Parliament as a “public service�1 and it is characterized, in effect, by the presence of a natural monopoly, which typically distinguishes a network structure. Not coincidentally, this sector is highly concentrated, which the Parliament has attempted to contain, over the years, by stressing (i) "market competition" and (ii) "competition for the market" through the inclusion of pro-competition elements in the awarding of concessions which, as we said, is characterized by natural monopolistic tendencies.
The “competitive” reform of the sector, initiated with the “Letta Decree” in 2000 (i.e., Legislative Decree no. 164/2000)2, introduced a public competitive bidding mechanism in these processes that permits a comparison among business interests in the market access phase. Subsequent manoeuvres by Parliament have then sought to mould the sector through a set of rules and best practices as uniform as possible at the national level, with the inclusion of precise, detailed provisions that, in essence, have resulted in: >!
the creation of Minimum Territorial Areas (the ATEMs) 3 for conducting the contract
assignment procedure; >!
the criteria for announcing the assignment procedure and determining offer, specified
primarily by Ministerial Decree no. 226 of 12 November 2011; >!
the format of the service contract;
>!
the guidelines for determining the VR (asset reimbursement value) that the new utili-
ty must pay to the outgoing concessionaire, unless the concession prescribes free devolution at the end of the procedure. The adoption of specific competitive measures for the assignment of the natural gas distribution service, however, has as yet had no "beneficial" effect due to a failure to publish most of the tenders and the presence of a slowdown, if not halt, in the tendering procedures already in progress 4. This situation is certainly aggravated by the numerous appeals to the Regional Administrative Court challenging the early tenders, advanced primarily against (i) the numerous distortions in applying the general rules on tendering (lex specialis) and (ii) failure of the ATEMs to comply with the procedure prescribed by law for the publication of tenders and execution of the bidding 5. This occurs, for one thing, even though the legal-regulatory framework provides for a substitutive power enforceable immediately by the Regions over nonconforming or delaying ATEMs 6.
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Despite the highly critical and problematic context for the so-called "gas tenders", the recent intervention of Parliament in the sector through the “Competition Bill" of 2/8/2017 (Law no. 124/2017) seems important and significant, in that it: 1.!
established that the procedure of verification by ARERA does not apply when the
contracting authority self-certifies that it followed the guidelines and that the deviation “of the asset reimbursement value and value of the net properties, net of public grants in equity and private contributions related to the local aggregate assets is not greater than eight percent, provided that the deviation of the individual municipality does not exceed 20 percent"; 2.!
mandated ARERA to adopt measures to simplify the process of tender document ve-
rification; 3.!
expressly abolished exceptions to the maximum scores prescribed by the regulation
for the adjudication criteria set forth in Ministerial Decree no. 226/2011; 4.!
expressly provided for greater acceptance of temporary joint ventures ("RTIs") 7.
Thus, with Law no. 124/2017 Parliament again intervened on the matter of gas tenders to guide the sector more significantly in the desired direction and make it, in effect, more attractive and accessible to economic operators. Pending issue by ARERA of all the simplification measures prescribed by this law, it is hoped that Parliament will also entertain the possibility of reintroducing a few measures likely to reinforce and stabilize the panorama of local tenders for gas network concessions by reintroducing the possibility of immediate activation of the regional substitution power for inefficient ATEMs; the prior definition by ARERA of solid criteria for cost-benefit analysis by the contracting authorities; the formulation and adoption of incentives to encourage the ATEMs to launch tenders.
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NOTE 1! Article 14(1) of Legislative Decree. no.164/2000. The same Legislative Decree, in Article 2, also defines the distribution activity, which consist essentially of transporting natural gas through local pipeline networks at low pressure, connected to the transport network by interconnecting points for delivery to the final customers on behalf of the sellers. 2! The Letta Decree was issued specifically to implement European Directive 98/30/EC. The sector legislation is influenced, in fact, by the spirit of the European Community itself in terms of launching, pursuing and completing the liberalization process as it also relates to natural gas, with a view to a common energy policy in the Eurozone in compliance with the principle of free movement established in the Mastricht Treaty of 1992. 3! The purpose of introducing the ATEMs was precisely to ensure greater competition in the distribution service. More specifically, the ATEMs “are a solution to the heavy territorial fragmentation of utilities with the consequent reduction in operating efficiency, the strong tendency to publicize the networks, the awarding of concessions based almost entirely on the offering of high concession fees to the local entities, given the absence of a precise recognition of their tariffs or little consideration of the outgoing concessionaire, in case of devolution, and the proliferation of administrative litigation on aspects such as expiration of the concessions, tendering procedures, and regulation of compensation” (E. Di Benedetto, “Temi critici e proposte per superare lo stallo”, La rivista di economia e gestione dei servizi publici (2007)). 4! It should be noted, for immediate reference, that according to recent estimates only 4% of the concessions (230 out of 6,500) were awarded in compliance with tendering procedures as set forth in the Letta Decree. 5! A typical example of noncompliance with the procedures indicated in the law is failure to inform AEEGSI (now ARERA) of the call for tenders. 6! An already critical situation was further complicated by the decision of Parliament (i) to eliminate the immediate enforceability of the regional substitutive power;(ii) to eliminate the system of penalties against noncompliant ATEMs; (iii) to grant an extension of the terms for announcing tenders not yet published (i.e. most of them). 7! Specifically, it provided that some of the requisites of the regulation referring to technical capacity may be possessed by even only one of the participants. In particular, Ministerial Decree no. 226/2001, in its postCompetition Bill formulation, establishes that operational experience may be demonstrated not only through the ownership of natural gas distribution system concessions for a number of customers equal to at least 50 % of those that would be served by the new concession but also by a series of conditions including the availability of structures, means, and personnel required for that operation in line with the quality standards of the service to be rendered.
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