Last update: April 12, 2008

Regulation of transportation

Access to transportation services

The regulation process began at the European level with the Gas Directive (Directive 98/30/EC of 22 June 1998) which was adopted in Italy through the so-called “Letta Decree” (Legislative Decree no. 164 of 23 May 2000).

This decree provides that transportation and dispatch activities are to be regulated on the basis of specific provisions issued by the Italian Authority for Electricity and Gas.

In implementing article 24, paragraph 5 of Legislative Decree no. 164/00, the Authority for Electricity and Gas in its Resolution no. 137/02 laid down the rules for free access to the transportation network and for the network code to be drawn up. Snam Rete Gas, observing the principles contained in that resolution, drafted its own Network Code, the document containing the set of transparent and non-discriminatory rules governing access to and use of the transportation services of its methane pipeline network.

The Authority for Electricity and Gas then adopted the measure (Resolution no. 138/04) in July 2004 which set the criteria for access to distribution services and for the drafting of the network codes by distribution undertakings, introducing special measures for the operations of interconnection points between transportation and distribution networks.

The European Union, although considering that Directive 98/39/ED had made a significant contribution to the realisation of an internal gas market, issued a second Community directive (Directive 2003/55/EC) which introduced new rules in favour of non-discrimination and transparency in the operation of the natural gas infrastructures through identifying the operators of transportation systems, storage and/or LNG and distribution systems. This directive is now in the phase of being adopted into national regulations by the individual member countries.

Setting the tariffs

The tariffs for transportation and dispatch of gas had in the past been set through agreements freely negotiated by Snam and Italian cultivators or importers.
On the basis of Legislative Decree no. 164/00 and its subsequent resolutions, the Authority regulated the natural gas transportation tariffs system by establishing criteria for setting the tariffs for various periods of regulation (for example, the first period of four years ran from 1 October 2001 to 30 September 2005).
The revenues were determined on the basis of the following elements:

  • the recognised cost of the capital invested (or Regulatory Asset Base - RAB)
  • a Rab yield rate
  • depreciation rates and operating costs
  • annual updating of revenues using a formula called “Revenue Cap”
  • updating revenues by unit of volume or “Price Cap”
  • additional revenues depending upon the investments in the network

The Authority introduced a system of incentives for new investments for the strengthening the network and the liquefied natural gas terminals. At the end of the first regulation period, the asset increase deriving from the new investments made during the first period was considered a part of the new Rab. The Authority itself was to ensure a fair yield on the capital invested.
The tariff system is therefore set so as to award efficiency and support development of investments.