LIBERALIZATION OF THE DOMESTIC NATURAL GAS MARKET (Advisory opinion)
PRESS RELEASE
PRESS RELEASE
Opinion on the reception of the community directive for the gas market
Exercising its powers under section 22 of the Competition Act the Competition Authority has submitted an opinion to the government and Parliament regarding the criteria set out in Law No. 144 of 17 May 1999 delegating the government to implement directive 98/30/EC containing common rules for the Italian natural gas market.
The Italian natural gas market is a de facto monopoly (or quasi-monopoly) headed by SNAM Spa in each phase in the chain (acquisition of foreign gas supplies, exclusive acquisition of nationally-produced gas from ENI, transport and storage). Furthermore, SNAM occupies a dominant position for the primary distribution of gas to industrial customers and power stations, and is the main supplier to the secondary distribution companies both directly through Italgas and indirectly through sales to local companies.
In the opinion of the Authority, the purpose of incorporating the Community directive into Italian law should be to regulate corporate activities connected with the use of natural monopolies (main and local transport networks) without segmenting the demand on the basis of 'eligibility' thresholds (namely, thresholds above which it becomes possible to directly negotiate the acquisition of gas), and without introducing restrictions on competition in other phases in the chain. For apart from transport (main and local), which are natural monopolies, the technological and economic conditions do not justify protecting from competition the raw material supply phase (from home or abroad), the use of gas storage facilities, and the sale of gas on the primary and secondary distribution market.
In short, the Authority is wholly in agreement with the criteria set out in section 41 of Law No. 114 of 17 May 1999 (Provisions governing the natural gas market), in the hope that:
(a) transparent and non-discriminatory conditions will be guaranteed for regulated access to the gas system (letter f)). To ensure this, the Electricity and Gas Authority must: set the price for gaining access to national networks and storage sites; continuously monitor the use of international networks for the transport of gas imported into Italy and the national networks for domestic distribution; be informed of the take-or-pay contractual commitments of the importing companies; require to be informed in advance of any decision by the network proprietor to deny access to third parties, and be empowered to settle disputes that may arise;
(b) all consumers which currently negotiate, collectively or individually, their own supplies with SNAM (letter g) first part) will be identified as 'eligible customers'. It would be appropriate at all events to include among the ‘eligible customers’ be 'consortia of companies' and the 'industrial districts' that typify the local production structure in many areas. It would als be compatible with the same directive (article 18(8)) to consider distribution companies as 'eligible customers'. The initial identification of consumers that are currently required to pay the tariffs charged to 'tied customers' should be limited to a specific predetermined time frame, under which this category of consumers could also be given the right of 'freedom of supply';
(c) measures should be adopted to require ENI and SNAM to sell-off a proportion of their natural gas supplies, both domestic and foreign, honouring the take-or-pay undertakings stipulated in the import contracts before the entry into force of directive 98/30/EC, in order to facilitate competition upstream of supply and promote competition downstream of distribution (primary and secondary) and of sales;
d) separate companies should be established to handle the transport, storage, supply and sale of gas, which are currently vertically integrated into SNAM, and a deadline should be set to separate the ownership of the companies performing these activities. aThis is seen as an indispensable step towards making the natural gas market in Italy fully competitive (letter e). Separating the ownership of the gas transport and storage companies should also include ensuring that the present control over storage is transferred to independent companies specifically incorporated for this purpose, subject to regulation by the Electricity and Gas Authority;
(e) any obligations relating to the provision of public service imposed on natural gas companies must be clearly defined, transparent, non-discriminatory and verifiable, in compliance with the powers of the Electricity and Gas Authority;
(f) for the purpose of complying with any public service obligations, existing storage facilities should be able to be used by every natural gas company operating on the domestic market (letter d), removing the de facto exclusive rights currently exercised over their availability by SNAM;
(g) conditions of 'reciprocity' should be established by adopting measures that are consistent with the provisions of article 19 (g)(2) of directive 98/30/EEC in order to encourage the widest possible level of competition by the Italian gas industry on the European market.
Rome, 10 November 1999