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ARERA, the Italian Regulatory Authority for Energy, Networks and Environment

The Italian Regulatory Authority for Energy, Networks and the Environment (Autorità di Regolazione per Energia Reti e Ambiente, ARERA) is an independent body created under Italian Law No. 481 of 14 November 1995 for the purposes of protecting consumer interests and promoting the competition, efficiency and distribution of services with adequate levels of quality, through regulatory and control activities. Initially limited to electricity and natural gas, the Authority's scope of action has been extended by means of some regulatory interventions.

First, Italian Decree No.201/11 converted into Italian Law No. 214/11, assigned the Authority also responsibilities as regards water services. Article 21, para 19, provides that: 'as regards the Italian National Agency for Water Regulation and Supervision (Agenzia nazionale per la regolazione e la vigilanza in materia di acqua), the functions related to the regulation and control of water services are transferred to the Italian Regulatory Authority for Electricity and Gas. Said functions shall be performed with the same powers allocated to said Authority by Italian Law no. 481 of 14 November 1995'.

Later, Italian Legislative Decree No. 102 of 4 July 2014, transposing the Energy Efficiency Directive 2012/27/EU into national law, allocated the Authority specific functions as regards district heating and cooling; within this context, the Authority also exercises control, inspection and sanctioning functions as provided for by the law establishing its jurisdiction, and exercises sanctioning powers under Article 16 of Italian Legislative Decree No. 102/2014.

Moreover, Italian Law No. 205 of 27 December 2017 allocated the Authority regulatory and control functions over the waste cycle, including sorted, urban and related waste. Also in this field, the responsibilities attributed are performed with the same powers and within scope of the principles, purposes and assignments, including those of a sanctioning nature, provided for by Italian Law No. 481/1995.

The Authority's work focuses on ensuring the promotion of competition and efficiency in the energy sectors, as well as ensuring uniform availability and distribution of the services, for all regulated sectors and throughout the country. The Authority also establishes adequate levels of quality for services, certain and transparent tariff schemes based on predefined criteria, while promoting user and consumer protection. These functions are performed by harmonising the economic and financial goals of the operators with more comprehensive objectives, with a focus on social issues, environmental protection and efficient use of resources.

Members

The Authority is a Board consisting of a President and four members appointed by Italian Presidential Decree. The appointment procedure provides for the two-thirds majority of the members of the competent Parliamentary Committees to express their binding opinion on the names proposed by the Ministry of Economic Development, jointly with the Ministry of the Environment and Protection of Land and Sea and approved by the Council of Ministers. This procedure ensures a high approval quorum, de facto bipartisan, amongst Parliament members.

Since August 2018, the Members in office are Stefano Besseghini, President, Gianni Castelli, Andrea Guerrini, Clara Poletti and Stefano Saglia.

The Members remains in office for 7 years and during this period they may not enter into other professional activities. For the two years following the termination of appointment, Members shall not enter into any collaborative, consultancy or employment relationship with firms operating in their areas of competence.

Independence and autonomy

The Authority works with full autonomy and independence of mind within the framework of the general policy guidelines introduced by the Government and the Parliament, and of EU rules and regulations. As a result of the Third Energy Package the Authority's independence and autonomy have also been reinforced in terms of organisation, operation and funding.
The Authority makes its decisions based on the law establishing its jurisdiction and defines the procedures and regulations for internal organisation, operation and accounting.

The resources for the Authority's operation do not come from the State budget but from a contribution from the revenues of regulated operators. This contribution was reduced (voluntarily by the Authority) with respect to the one part per thousand rule provided for by law, with variations depending on the sector and the activity carried out by various parties.

Responsibilities

The Authority regulates the areas of competence, through rulings (resolutions) and, specifically:

  • For the energy sectors, it establishes the tariffs for the use of infrastructures and guarantees equal access for operators;
  • Prepares and updates the tariff method for determining the fees for both the integrated water service and the integrated waste service and approves the tariffs prepared by the competent bodies;
  • Defines the criteria for determining the users' fee for connection to the district heating network and the procedures for exercising the right to "disconnection";
  • Encourages investments in infrastructure with particular emphasis on adequacy, efficiency and safety;
  • Ensures advertising and transparency of service conditions;
  • Promotes higher levels of competition and more acceptable safety standards in procurement, with particular attention to harmonizing regulation for the integration of markets and networks internationally;
  • Establishes provisions on accounting separation for the electricity and gas sectors, the water sector and the district heating service, as well as on the compulsory functional separation for the electricity and gas sectors;
  • Defines the minimum quality levels for services in terms of the technical and contractual aspects and the service standards;
  • Encourages the rational use of energy, especially with regard to the dissemination of energy efficiency and the adoption of measures for sustainable development;
  • Until the complete opening of the markets scheduled for July 1, 2019, it updates the reference economic conditions for customers who have not chosen the free market in the energy sectors, on a quarterly basis;
  • Increases levels of protection, awareness and information to consumers;
  • Monitors, supervises and controls the service quality, safety, access to networks, tariffs, incentives for renewable and similar sources, including in collaboration with the Guardia di Finanza (Tax Police) and other bodies, including the Cassa per i Servizi Energetici e Ambientali (Fund for Energy and Environmental Services - CSEA) and the Gestore Servizi Energetici (Energy Services Manager - (GSE).
  • It can impose sanctions and assess and possibly accept commitments by companies to reinstate the adversely affected interests (Italian Legislative Decree No. 93/11).

The Authority also carries out an advisory role to the Parliament and the Government to which it can submit reports and proposals; each year it presents an Annual Report on the state of services and the activities carried out.

Transparency in the decision-making process

The Authority's provisions are adopted according to procedures governed by their internal regulations and by regulations on the general operation of the Public Administration, based on efficiency and transparency criteria. Considerable space is devoted to consultation with all stakeholders, through the dissemination of documents, the collection of written observations and any collective and individual hearings.
The mandatory public disclosure of records and provisions of a general regulatory nature is assured through publication on the Authority's website (art. 32, paragraph 1, of Italian Law No. 69/09).An appeal against the Authority's provisions can be made through the Lombardy Regional Administrative Court (TAR Lombardia), which represents the first instance of the administrative process.
Since 2005, the Authority has introduced the Analysis of Regulatory Impact (AIR) on provisions of particular importance, as a further instrument for a better quality of regulation.

International activity

Since its establishment, the Authority has implemented an intense activity of international collaboration with regulators of European and non-European countries, in order to promote the harmonisation of rules and the integration of the energy markets of neighbouring countries and to achieve the objectives of effective and efficient operation of the national market. The Authority's first area of intervention in this context is the process of forming the new regulatory framework for the European electricity and gas markets envisaged by the so-called Third Energy Package (European network codes) and to this end it participates in the work of the Agency for the Coordination of Energy Regulators - ACER.
Since 22 November 2017 a representative of the Authority has been Vice Chairman of the ACER Regulatory Committee. The Authority is also a founding member of the Council of European Energy Regulators - CEER, a voluntary association whose task is to consolidate the collaboration between European Union regulators in areas of common interest.

The Authority is the main promoter of the Association of Mediterranean Energy Regulators - MEDREG, of which it holds the permanent Vice Presidency, after two terms as President; the MEDREG Secretariat is in Milan, housed at the Authority's headquarters. The Authority also has a leading role in the Energy Community Regulatory Board - ECRB, a body that is increasingly aligned with ACER's responsibilities for the Balkan area, by virtue of the Energy Community Treaty signed between the European Union and the countries in this region.

Through CEER and MEDREG, ARERA also provides support to the International Confederation of Energy Regulators (ICER) aimed at further institutionalizing the role of global regulation.

Over the years, the Authority's role internationally has been consolidated not just associatively, but also through the strengthening of bilateral relations with regulators of other countries that have led to the implementation of formal cooperation agreements and twinning projects financed by the European Commission. In collaboration with the Greek regulator (Regulatory Authority for Energy of the Hellenic Republic - RAE), particularly in the two year period 2015-2017, the Authority implemented a twinning project to support the Egyptian regulator (Egyptian Electric Utility and Consumer Protection Regulatory Agency - EgyptERA) entitled "Strengthening the institutional capacity of the Egyptian Electric Utility and Consumer Protection Regulatory Agency".(Final report)

Following the assignment of responsibilities for the regulation and control of water services (Italian Law No. 214 of 22 December 2011), in April 2014 the Authority promoted the launch of the European network WAREG (European Water Regulators) to facilitate cooperation between regulators in the water sector, exchange good regulatory practices and foster a harmonised and stable regulatory framework on a European level. ARERA has held the Presidency of WAREG since 2015 and in 2017 it promoted the constitution of WAREG as an Italian not-for-profit association based at its offices in Milan.