The Italian Competition Authority spotted a vestige of the old monopoly regime in the energy sector
In a recently given opinion the watchful eyes of Italian Competition Authority (ICA) has spotted an arrangement contrary to the spirit of competition in the extension of Enel exclusive research and exploitation rights of geothermal resources in some areas of Tuscany (AGCM, case AS474, Disciplina della Ricerca e della Coltivazione delle Risorse Geotermiche)
Under Italian law the general rules governing the research and exploitation of geothermal resources are laid down by the Mining Act of 1927. As geothermal resources belong to the state, the right of carrying out researches into these resources and exploit them are given by state to interested operators by means of a concession. The Act 625/1996, which has implemented Directive 94/22 EC rules that such a concession are awarded through open tendering procedures.
However, the Act 896/1986, enacted well before the implementation of EC measures pursuing to the liberalization of the energy sector, shapes quite a generous regime for Enel and Eni, the electricity and gas incumbent operators, respectively. On the one hand, it confers on Enel exclusive research and exploitation rights, through a concession, in relation the geothermal resources of national interest located in Tuscany, namely in the provinces of Grosseto, Livorno, Pisa and Siena. On the other hand, it gives Enel and Eni a preferential treatment as for the awarding of researches authorizations and exploitation concessions to be carried out in the same areas. Finally, the law stipulates that the length of the concessions is 30 years and they may be extended for 10 more years at once.
It is uncertain whether the Act 896/1986 has been repealed by the Act 625/1996, which probably did at least implicitly. As an attempt to adapt the concessions awarded to Enel under the old monopoly regime to the new market regime, the local authorities of Tuscany and Enel, under the auspices of the government, entered into an agreement by which the former would extend the Enel concessions, due to expire in 2013 and 2020, respectively, until 2024.
In the view of the ICA, such an arrangement, instead, may infringe competition and frustrate the liberalization process. Indeed, it results in an automatic entrenchment of the Enel monopoly in the market for research and exploitation of geothermal resources to the detriment of new operators, whose chances to enter in the market are consequently reduced.
In light of the public nature associated to research and exploitation of geothermal resources, the ICA recognizes that the award of exclusive rights in the form of concessions to carry out these activities is justified. However, in order to minimize the adverse effect on competition of such regime, it is necessary to adopt a competition for the market model as for the choice of the entity to which award the concession. In this respect, for the sake of legal certainty, the ICA suggest the legislator should intervene and specifically abrogate the Act 896/1986 and sets out that a tender procedure is a mandatory requirement under open markets to award such concessions. Finally, in case the previously concession-holder has not fully recoup the investments made to carry out the research and exploitation activities, the outstanding costs should be incorporated into the bidding price of the tendering. Thus, the former concession-holder should be able to recover such costs.
Under Italian law the general rules governing the research and exploitation of geothermal resources are laid down by the Mining Act of 1927. As geothermal resources belong to the state, the right of carrying out researches into these resources and exploit them are given by state to interested operators by means of a concession. The Act 625/1996, which has implemented Directive 94/22 EC rules that such a concession are awarded through open tendering procedures.
However, the Act 896/1986, enacted well before the implementation of EC measures pursuing to the liberalization of the energy sector, shapes quite a generous regime for Enel and Eni, the electricity and gas incumbent operators, respectively. On the one hand, it confers on Enel exclusive research and exploitation rights, through a concession, in relation the geothermal resources of national interest located in Tuscany, namely in the provinces of Grosseto, Livorno, Pisa and Siena. On the other hand, it gives Enel and Eni a preferential treatment as for the awarding of researches authorizations and exploitation concessions to be carried out in the same areas. Finally, the law stipulates that the length of the concessions is 30 years and they may be extended for 10 more years at once.
It is uncertain whether the Act 896/1986 has been repealed by the Act 625/1996, which probably did at least implicitly. As an attempt to adapt the concessions awarded to Enel under the old monopoly regime to the new market regime, the local authorities of Tuscany and Enel, under the auspices of the government, entered into an agreement by which the former would extend the Enel concessions, due to expire in 2013 and 2020, respectively, until 2024.
In the view of the ICA, such an arrangement, instead, may infringe competition and frustrate the liberalization process. Indeed, it results in an automatic entrenchment of the Enel monopoly in the market for research and exploitation of geothermal resources to the detriment of new operators, whose chances to enter in the market are consequently reduced.
In light of the public nature associated to research and exploitation of geothermal resources, the ICA recognizes that the award of exclusive rights in the form of concessions to carry out these activities is justified. However, in order to minimize the adverse effect on competition of such regime, it is necessary to adopt a competition for the market model as for the choice of the entity to which award the concession. In this respect, for the sake of legal certainty, the ICA suggest the legislator should intervene and specifically abrogate the Act 896/1986 and sets out that a tender procedure is a mandatory requirement under open markets to award such concessions. Finally, in case the previously concession-holder has not fully recoup the investments made to carry out the research and exploitation activities, the outstanding costs should be incorporated into the bidding price of the tendering. Thus, the former concession-holder should be able to recover such costs.
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