Autorità per l'energia elettrica e il gas 1

The Role of Acquirente Unico in the Italian Electricity Market

Tunis, 12th Sept. 2013

2

Regulatory framework

Directive 96/92/CE – the Italian way to the liberalised market

Starting from vertically integrated monopolies (ENEL

and municipalities-owned utilities), generation and

selling were liberalized;

Transmission and Distribution were unbundled;

Progressive opening-up of the demand: distinction

between “eligible” and “captive” market;

Acquirente Unico was set up to procure energy to the

captive market (electricity supply to captive customers

was charged to distributors).

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Regulatory framework

Directive 2003/54/CE – The Enhanced Protection market

Free Market:

From 1st July 2007, all customers are free to choose their

suppliers

Enhanced Protection Market

- households & SMEs (LV connected, <50 employees, <10

MEuro/y turnover) without a supplier.

- served by distributors (or their unbundled companies)

Safeguard Market

- customers not included in the enhanced protection market

and without an electricity supplier

- served by AU-selected retailers

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Regulatory framework

Italian Electricity Market Model (from 1st July 2007)

Acquirente Unico

E/Protection Customers Customers

E/Protection Suppliers Safeguard

Suppliers

Safeguard Customers

Power Exchange (Day Ahead / Medium Term)

Producers & Imports

Safeguard Market

Retailers

Wholesalers

Open MarketEnhanced Protection Market

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Regulatory Framework

Directive 2009/72/CE – Empowering customers

Confirmation of the “enhanced protection market”

Periodical monitoring surveys on competitive conditions of retail markets

Ensure effective treatment and settlement of complaints

More efficient procedure to switch (< 3 weeks)

UE Infringement Procedure closed in 2012:• Enhanched protection focuses on the interests of consumers and is based on

their free choice ;

• Price is not established by the State, but is based on AU supply costs operating in the free wholesale market

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Self-production

Free market

Enhanced protection

market

TWh∆ %

* estimated

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

227.2 204.3

186.8 182.1 169.3 164.8 152.9 124.3

101.7 95.3 89.4 84.3 78.1 72.9

47.4 78.2 101.8 117.5 135.0 144.4 164.4195.0

217.5207.5 220.0 227.2

223.0 222.7

23.8 22.3 22.2 21.1 21.1 21.3 20.2 20.6 20.3

17.5 21.1 23.1

24.1 25.1 298.5 304.8 310.7 320.7 325.4 330.4 337.5 339.9 339.5

320.3 330.5 334.6 325.2 320.7 4.4% 2.1% 1.9% 3.2% 1.5% 1.6% 2.1% 0.7%

-0.1% -5.7%

3.2% 1.3%

-2.8% -1.4%

Regulatory Framework

Supply of electricity to the enhanced protection market

From 2007-2012

“enhanced

protection”

market has been

reduced from

124.3 TWh to

78.1 TWh (24%

of total energy

demand)

*

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Regulatory Framework

Market evolution: switching trend for households

July

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

20,000,000

22,000,000

24,000,000

26,000,000

28,000,000

2007 2008 2009 2010 2011 2012 2013 2014

-3,4% (-0,9 Mil)

-5,0% (-1,3 Mil)

-4,7% (-1,2 Mil)

-3,8% (-0,95 Mil)

-5,2% (-1,2 Mil)*

-2,7% (-0,8 Mil )

-5% (-1,1 Mil)*

in 2012 about 950,000 customers have left E/P market, while 208.000 have switched-back

June 2007

March 2013 ∆

27,9 mln 22,5 mln -19,6 %(-4,1%/y)

* estimated

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in 2012 about 192,000 customers have left E/P market, while 100.000 have switched-back

June 2007

March 2013 ∆

6,3 mln 4,5 mln -27 %(-5,4%/y)

July

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

1 Q

2 Q

3 Q

4 Q

4,000,000.0

4,500,000.0

5,000,000.0

5,500,000.0

6,000,000.0

2007 2008 2009 2010 2011 2012 2013* 2014*

-6,0% (-0,32 Mil)

-4,5% (-0,23 Mil)

-1,9% (-0,10 Mil)-4,1% (-0,19 Mil)

-5,9% (-0,27 Mil)*

-12,1% (-0,8 Mil)

-5,3% (-0,24 Mil)*

* estimated

Regulatory Framework

Market evolution: switching trend for SMEs

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In procuring electricity to the EP consumers, AU forecasts

(medium and long term) the electricity demand of the enhanced

protection market

Economic indices, such as GDP variation and forecasts,

industrial production for sectors, exchange rate €/$;

Energy market indices, such as electricity supply in Italy, oil

reference prices;

Retail market evolution, such as households and SMEs demand

and consumers switching trends.

Energy procurement

Electricity forecasts

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Definition of a procurement portfolio, which diversifies supply

sources and uses appropriate price-risk hedging instruments,

minimising the purchasing costs.

AU operates in regulated (spot and forward) markets and

holds e-auctions with transparent and non-discriminatory

procedures.

Energy portfolio in 2012 (78,1 TWh)

physical bilateral contracts

57%

purchasing electricity on Power Exchange

43%

Energy procurement

Procurement strategies

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Energy procurement

Reference prices AU transfers electricity to E/P Suppliers at a

price monthly based on its energy purchasing

costs, added with its own operating costs (i.e.

Supply Price);

The final price of electricity (Reference

Price) applied to end users is set quarterly by

AEEG on the basis of the Supply Price, adding

regulated components*

• Supply Price

53%

• Network Tariffs (Trans/Distr/Metering)*

15%

• System general costs (FER, R&S, etc.)*

19%

• Tax and VAT

13%

– Source: 3rd Quarter 2013, household, 3kW,2.700 kwh/y

Free Market Vs Reference Price

3rd Quarter 2013, household, 3kW, 2.700

kwh/y

Series1

-20% -10% 0% 10% 20%

-18.60%-13.70%

-12.65%

-12.09%

-11.13%

-10.03%

-9.46%

-9.00%

-8.66%

-8.50%

-7.89%

-7.61%

-7.01%

-1.54%

0.26%

1.37%

1.61%

2.18%

4.90%

5.31%

6.54%

7.02%

7.43%

7.46%

7.97%

14.89%

Fixed PriceRef. Price Indexed All-included

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AU operates as any other market participant, using the same procurement instruments, adopting transparent and non-discriminatory procedures and balancing its accounts;

It represents a wedge between wholesale and retail markets, thus permitting to avoid conflict of interests.

It is an aggregator of demand, permitting to transfer wholesale market prices to small customers

The reference price is based on AU costs to buy energy for E/P customers.

Energy Procurement

Main evidences

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In order to support small customers AEEG, with AU support, has realized an help desk to inform about the open market benefits and rights, and to receive claims not properly solved by suppliers;

It represents an important support to monitor and to tune market regulations;

Main issues are: incorrect billing, not-required contracts, market information;

From 1st December 2009 to 30th June 2013:

- 2.000.000 inbound calls- 140.000 new complaints (by mail, fax, e-mail)

Customers Empowerment

Energy Consumer Help Desk

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To implement the EU Third Package to introduce an Alternative Dispute Resolution (ADR), AEEG has implemented an electronic procedure to solve dispute between customers and their suppliers.

Some features:

- completely free of charge;

- 100% on line: applications are submitted on a web site and parties meet in a virtual room;

- The Parties may accept or not to participate as well as to reach a final agreement

- Consumers Associations are involved to eventually support consumers to access the Service;

Customers Empowerment

Energy Conciliation Service