An investigation conducted by the Italian Competition Authority and the Italian Electricity and Gas Authority (the "Italian Authorities") commenced at the end of 2007 with the aim of looking into possible obstacles to the development of new gas storage capacity, evaluating any potential means of flexibility and the ease of access to such means by new operators. It also covered the legal and regulatory context so as to assess its impact on competition.
The results of the investigation determined that this sector needs “a significant increase in storage capacity, which is essential in order to improve energy security”. The “critical factors” outlined in the Report have required, even in the recent past, Government intervention to safeguard the national system, leading to higher energy charges for businesses and home users (for example, the use of interruptible supply contracts, the obligation to maximise imports and use of sources other than gas for the production of electricity, thus overriding environmental rules).
The Report points out that the upgrades so far carried out by current majority supplier, Italian multinational ENI, (which by way of Stogit - now part of Snam Rete Gas - holds 97 per cent of reserves), have been “absolutely marginal” and insufficient to ensure the flexibility needed by operators to compete effectively in the liberalised marketplace. According to the Italian Authorities, ENI may benefit from the current lack of storage since it has alternative means to achieve flexibility compared to its competitors.
'Rationing' of Storage and Vulnerability of the System
The “effective rationing of storage” constitutes the main obstacle for businesses, which sell – or would like to sell – gas, in particular to industrial customers and electricity generators according to the Italian Authorities. The investigation included a focus on the conduct of companies, particularly ENI, as well as the overall scarcity of storage capacity and storage services. In this context, the Report emphasises the need to “eliminate the barriers and distortions that impede the development of new storage capacity and to produce new rules for the balancing of access to and use of such storage capacity”.
Furthermore, the Report points out a number of critical factors that make the whole Italian system vulnerable, such as the need to satisfy peak daily gas demand in “unusual conditions” limiting the import capacity, e.g. in particularly severe cold snaps or when there is a technical, commercial or political event like the Russia-Ukraine crisis.
Sale of Assets Following the Model Used for the Electricity Market
One of the measures proposed by the Italian Authorities to increase competition is the sale by ENI to third parties “of subsets of assets”. This type of measure has already been tested in the electricity market in order to encourage its liberalisation. In the view of the Italian Authorities, this could lead to various positive consequences such as: entry of new operators with the creation of several independent storage companies; reduction in the influence of the dominant operator in storage activities; greater and faster opening up to competitive developments and development of new capacity. All this should be oriented to creating a ‘national hub’ for gas (as indicated by the Italian Government itself), which can also be an efficient resource for the wider European market.