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Relations with authorities

The Italian regulatory authorities
The Italian regulatory authorities that mainly affect the Group's activities are the AEEG [Italian Authority for Electricity and Natural Gas] (insofar as monitoring and regulating quality levels, setting rates for grid activities and the regulated components of the sales activities, monitoring of economic, accounting and organizational aspects of the activities that concern the equal treatment of competitors and the transparency of the conditions for access to the networks) and the Italian Antitrust Authority [AGCM] (antitrust, authorizations for mergers and acquisitions, protection of consumers and monitoring of the correctness of commercial policies).
Relations with the AEEG are specifically structured, also in view of the obligations to consult with regulated operators, prescribed by the law that instituted it. During 2011, given that the new Board had been appointed, officially in office from 16 February, regulatory activities were resumed along with the disclosure of numerous opinion papers in which Hera actively took part.
Again during the year, the authority definitively closed the two investigations launched vis--vis Hera S.p.A. in 2009:

  • with respect to the obligation to replace cast iron tubes with hemp and lead joints, by means of VIS 39/2011 the Authority fined Hera S.p.A. Euro 55,000;
  • with respect to the obligation to make metering data available to sales companies, by means of VIS 86/2011 the procedure was closed imposing a fine of Euro 84,900.

The status of the investigations started by AEEG in 2010 and still underway is as follows:

  • notices to customers about the application of bi-hourly tariffs for the sale of electricity (AEEG VIS 45/2010 resolution): Hera transmitted the information to the AEEG and aligned itself with respect to the notice obligations (the proceedings are still ongoing);
  • cognitive investigation into the installation of turbine gas metres (AEEG VIS 18/2010 resolution): the requested information has been provided and a hearing was held at the Offices of the Authority. By means of resolution VIS 138/2010, the Authority closed said investigation with the publication of the related report;
  • alleged improper or misleading commercial practices in the water services sector (late communication of tariff changes; acceptance of an insurance fund for leaks by means of tacit consent) (AGCM PS/681 investigation): the investigation ended on 1 December 2010 with a fine of Euro 190,000. With regard to this fine, duly paid, Hera has made an administrative appeal to the Lazio administrative court.

During 2011, the AEEG launched another three investigations which involved Group companies:

  • resolution VIS 5/2011, launch of cognitive investigation into the disbursement of dispatch, transmission, distribution and metering services and the energy Protection services at the Terni chemical complex. The investigation directly involved Hera Comm in its capacity as the party which runs the Protection service responsible for the area; said company was called to a hearing at the Authority Offices and was requested to provide information. The investigation was closed by means of resolution VIS 82/2011;
  • resolution VIS 42/2011, launch of a cognitive investigation into the disbursement of the connection services to the network of electricity generation plants by the network operators. The investigation was closed by means of resolution VIS 99/2011 in which the AEEG published a report on the information collated. It envisaged a collation of data inherent to observance of the regulations for active connections;
  • resolution VIS 76/2011, launch of reconnaissance activities concerning contracts not requested for the supply of electricity and/or gas. Within the sphere of this investigation, Hera Comm was called to a hearing at the Authority Offices.

In conclusion, it should be recalled that during 2011, the AEEG did not make any inspections care of the Group.

The Area Authority for water and waste services

One of the pivotal points of the evolutionary process that has involved the local public services system in recent years is the separation of the functions of regulation and inspection on one side (maintained by public administration) and management on the other side, opening the supply of services to public-private or completely private businesses. The other fundamental concept identified is that of "optimal regional environment", meaning the size of the area necessary to guarantee management based on the principles of efficiency, effectiveness and economy, overcoming the current fragmentation.
The laws that introduced this concept for water services and municipal waste management are Law 36/1994 (Galli Law) and Legislative Decree 22/1997 (Ronchi Decree), respectively. The Emilia-Romagna Regional Authority, in Regional Law no. 25/1999, had identified the optimal regional environments in the province providing for the establishment of ATOs for public services, subsequently Area Authorities, with jurisdiction over integrated water services and management services for municipal waste and related functions. The Area Authorities had taken over the functions, previously carried out by Municipalities, of regulating and overseeing services, introducing a large area view to assure greater operating efficiency, effectiveness and economy.
In brief, the functions of the Area Authorities included:

  • specific planning activities for services and preparation and approval of investment programmes;
  • regulation: this function is concerned with defining procedures for contracting services, defining relationships with operators, drafting regulations related to services, and setting rates;
  • inspection of services performed by the operator;
  • protecting users interests, guaranteeing continuity and quality of fundamental services, and avoiding the risk of critical or emergency situations.

Regional Law no. 23 dated 23 December 2011, after repeated postponements of Law no. 191/2009 which established the abolition of the ATOs, set up the Emilia-Romagna Area Agency for water and waste services for the associated exercise of the functions relating the integrated water service and the municipal waste management service formerly carried out by the previous Water and Waste Regulatory Authorities.

GIDUT, a sea of... separate waste collection on the beaches of Ravenna and Cervia

In June 2011, separate waste collection arrived on the beach. The beach separate waste collection project (entitled G.I.D.U.T, "Gestione Imballaggi Differenziati Utenze Turistiche") is furthered and achieved by the Hera Group, in collaboration with the Emilia-Romagna Regional Authority, ATO and the Municipal Authorities of Ravenna and Cervia. Millions of tourists on the Ravenna and Cervia coast can adopt the best practices of separate waste collection also on the beach thanks to the 2,600 plus bins which make up a small waste separation and recycling unit for the disposal of plastic, glass/tin cans and paper and also residual waste.

Hera's participation in the development of public policies

In order to safeguard its interests and to promote discussion on the development of the market and regulated services, the Hera Group is involved with the appropriate institutional offices both by participating in developing the positions issued by the relevant associations (especially Federutility and Federambiente at national level and Confservizi at regional level) by being present in delegations and roundtables organised by them, as well as, increasingly, individually, by direct involvement with the public administration and national and local regulatory and law-making entities.
With regard to local public services, at national level Hera intervened with its own written and participative contributions, also in collaboration with economic research centres of institutional importance, so as to spread modern concepts of effective regulation of the sectors and infrastructural development. The Group has taken steps in order to obtain greater legislative certainty within the sphere of incentive systems for renewable sources, with particular regard to energy recovery deriving from the combustion of waste, so as to encourage the promotion of alternative energy and achieve the targets required by EU law. At local area level, Hera has offered its expertise and ideas in the process for the formation of the new regulatory governance of the water and waste management services, further to the abolition of the Water and Waste Regulatory Authorities, so as to achieve an efficient and adequate set-up
In the energy services area, Hera continued to support intense activity in 2011 by means of taking part (via Federutility) in the activities of the Ministry for Economic Development concerning the decrees regarding future tenders for the awarding of the gas distribution services, as well as the consulting processes of the Electricity and Gas Authority. The individual observations of the Group in particular concerned the retail market, with regard to the remuneration of the marketing activities in sales and the criteria for the application of the fees to the end customers, the discipline of the execution of the contracts by withdrawal/delivery point already active, the general retail sales monitoring system, the publication of the performances of the operators regarding claims handling, the Find Offers system for facilitating the end customer, the refund of the charges incurred by operators and protection of customers whose supply cannot be cut off. Again via consulting processes, Hera intervened, by means of trade association activities, via its proposals regarding the regulation of the fiscal and economic items of the new gas balancing system, the launch of the "Integrated Information System", and the quality of the electricity distribution service for the 2012-2015 regulatory period. Hera contribution was also explicitly represented by means of participation in work groups, such as, for example, the round table for the review of the new regulations for the default services within the sphere of the handling of arrears, which was followed by a consulting process which continued in 2012.
Lastly, with regard to tariffs, Hera actively took part in the long process for the formation of the provisions relating to the electricity sector for the regulation of the 2012-2015 period, as well as to make changes to the tariff regulation of the metering services on the natural gas distribution networks, in relation to the obligations envisaged for district metering.