Gas storage services and regulation in Italy: A Delphi analysis

Economics Bulletin, 2005

In order to analyze competition in gas markets, an intermediate activity of storage is included in a classical model of vertical relations. In that case, firms can inject or withdraw strategically natural gas resource. The access to the storage facility can deteriore the welfare since it incites the vertically integrated firms (production and distribution) to withdraw strategically. This incentive is reduced by vertical integration between storage and distribution. Thus it improves the social welfare.

Energy Economics, 2011

The European Commission wants to implement a single market for gas. One of the components of this market is a regulated provision for "security of supply" which consists of rules for the implementation and use of a given reserve stock of gas. We investigate the impact of this policy on the profitability of a storage operator, using data from Denmark and Italy. Keeping storage capacity constant, the costs of the strategic stock are around 20% of the value of the storage market for Denmark, and 16% for Italy. This cost is due to the inability to extract arbitrage profits from the captive stock. Furthermore, the strategic storage restriction induces behavior that would virtually never be replicated by a private storage operator in an unconstrained market, in particular in the first 6 months of the year when unconstrained firms empty their reservoirs much faster, suggesting the strategic restriction is unnecessarily distorting the market.

Inquiry, 2007

In this paper, we study how competition on downstream gas markets is in ‡uenced by sourcing decisions in the supply chain. We analyze the sequential relationships between storage decisions and intermediate pricing in spot markets. We show that an upstream leadership in the access to storage facilities leads a dominant …rm to adopt strategic storage decision. This strategy consists in stockpiling more than supplied in the downstream market. This behavior is a part of a raising rival's cost strategy for the leader. Furthermore in some cases, optimal regulation of gas storage access may not prevent such a behavior.

Utilities Policy, 2012

During the three-year period 2007e2009, the Italian Regulatory Authority for Electricity and Gas has issued numerous measures concerning the retail market of natural gas. The same period was characterized by a deep economic and financial crisis involving the industrial sector and, in particular, the energy companies. This paper aims to analyse the combined effect of the new regulatory measures and of the economic crisis on the business performance of natural gas retail companies. To that aim, the balance sheets were analysed for a sample of 111 companies and the profitability, financial and liquidity indicators were calculated. A cluster analysis was then performed utilising the most important performance indexes. The firms within each cluster were analysed with respect to the main company characteristics.

Environmental Economics and Investment Assessment II, 2008

Owing to the process of liberalization, the European energy markets have undergone a radical transformation over the last decade. In this paper we analyse the Italian natural gas market, focusing in particular on retail with the objective of assessing the performance of the natural gas retail operators whilst also taking into account the strategies adopted after the liberalization process. To that aim, company performance is analysed using the Edgeworth index which enables an assessment of levels of both profitability and productivity. Two types of comparisons are carried out based on the processed data. The first of which concerns the size of the company and second regards the degree of specialisation or diversification of the services offered.

2011

>IJH=?J This paper studies the impact of a re in 2006 which removed the possibility of access to the Rough gas storage facilities covering over 80% of total UK storage, at a time when major withdrawals from storage would have likely taken place. Implicitly, it shows the value of such gas storage facilities, in a country with relatively little storage, where we might therefore see a considerable impact. We nd that the major eect on activity was through an increased sensitivity of supply to prices and an increased variance in this sensitivity, not through physical shortages of gas.

SSRN Electronic Journal, 2003

In this paper we review the recent liberalization process in energy markets promoted by the European Commission in the late Nineties and implemented in all the member countries. The electricity and gas industries are characterized by a predominant role of network infrastructures, and by upstream and downstream segments that can be opened to competition. The key issues that must be addressed to design a liberalization plan include the horizontal and vertical structure of the industry, the access to the transport facilities, the organization of a wholesale market and the development of competition in the liberalized segments. We analyze the liberalization policies in the EU as a two step approach: the Directives and the national liberalization plans have focussed so far on the goal of creating a level playing field for new comers through Third Party Access to the network infrastructure, the unbundling of monopolized from competitive activities of the incumbent and the opening of demand. Today, within a heterogeneous picture, all the member countries are implementing this phase. The second step refers to the development of a competitive environment in the liberalized markets, a goal that requires, but is not implied by, the creation of fair entry conditions to new comers. The reduction of market power of the incumbent through divestitures and the entry process, and the design of the market rules are the crucial issues, and neither the Directives not the national plans have been in most cases very effective on this issue. As a result, while we can start appreciating the entry of new operators in both the electricity and the gas industry, the effects on consumers choice and final prices are rather limited, in particular in the gas industry. In the second part of the paper we move our attention to the Italian case, describing the national liberalization plans and the policy issues still opened. Both the electricity and the gas reforms are more advanced than the minimum standards required by the Directives, and include in some cases interesting innovations. In particular, the Bersani Decree on electricity requires capacity divestitures in the generation plans and adopts a proprietary unbundling of the transport network, while the Letta Decree on gas introduces antitrust ceilings and a very quick schedule towards complete demand opening. Among the more relevant open issues, in the electricity industry the incumbent firm can maintain a market share of 50% in generation, with likely distortions in the wholesale market. There are two possible ways out of this central problem: a "market solution" that requires further reductions in the generation capacity of the dominant firm and an improvement in transborder interconnection capacity together with the start up of the wholesale market; an "administrative solution" that tries to limit the effects of the incumbent market power on prices by assigning the foreign low cost energy to some categories of (large) customers and introducing bid caps on prices, while delaying the opening of the wholesale market. It is not clear which choice has been made by the Government, even if the latter emerges from many recent decisions. In the gas industry the insufficient unbundling of the dominant firm is the most serious obstacle to developing competition. The antitrust ceilings may even determine perverse effects, with the new firms acting as (upstream) customers and (downstream) competitors of the dominant firm. Moreover, the access to international transmission capacity seems a crucial issue. Finally, the nature of competition with take-or-pay contracts suggests that a wholesale market for gas would be necessary. The last open issues are institutional: we argue that the recent assignment of the energy policy at the regional level and the prospected reduction of independence of the energy authority are two institutional reforms with a very negative impact on the liberalization process.

A B S T R A C T This paper presents a crosscountry benchmarking study of natural gas distribution to final consumers and compares two samples of companies in Italy and Ukraine. A 2-stage DEA procedure calculating efficiency of gas providers and identifying critical context factors and policy issues that affect it is implemented. Both countries are low performing in terms of operators' technical and scale efficiency and there is room to design more efficient market configurations. Some issues need attention to develop an effective gas market policy: a) search for efficiency requires accurate investigation of its main drivers that depend on context factors; b) while greater efficiency is necessary to reduce cost and increase service quality, at different stages of progress of the reform process other goals may be more important; c) gas industry reform process should be planned adopting a systemic perspective as its development does not remain confined to the sector, but implies changes in the whole country economy, particularly when the gas market is of primary relevance to the economy; d) a more comprehensive package of reforms may be necessary to make gas market reform successful; e) even though the gas market reform is an economic process, it has unavoidably social and political implications.

The International Spectator, 2006

This article discusses the evolution of the Italian legal and regulatory framework in the energy sector. After a description of the liberalisation and decentralisation undertaken, it raises a few issues and questions about the future course of Italian energy policy and in particular whether an international side can be revived in the near future.

Fiscal Studies, 2001

The UK gas industry has undergone major changes since it was privatised in 1986 as a fully integrated monopoly. The most significant of these have occurred not as an outworking of the privatisation legislation but by the intervention of the ordinary competition authorities in support of an active industry regulator. While price capping continues to be used as the primary instrument for welfare protection against the still substantial monopolistic powers of the incumbent, new competition which has been positively encouraged, has had the greater impact on prices and choice. Recently, however, the regulator has encouraged the use of auctions for the sale of storage capacity. This paper considers the merits of auctions and makes a tentative evaluation of their effectiveness. Further use of auctions is recommended but reserve prices are considered inappropriate where monopoly power still remains.