Tenders for Assignment of Gas Distribution Concessions

Energy & Infrastructure Alert | August.28.2017

Italiano: Gare d'ambito per l’assegnazione delle concessioni reti gas. Le importanti novità della Legge Concorrenza che entrerà in vigore il 29 agosto 2017: una conferma dell'opportunità per i fondi di investimento

The key novelties of the Law on Competition entering into force on August 29, 2017: confirming opportunities for investment funds

Last July we organized, jointly with the Consorzio Concessioni Reti Gas, a workshop aimed at promoting a conversation between the relevant market players taking stock of the situation of future legislative evolutions in the gas distribution sector.

This is a situation that, after 17 years, could lead to the completion of the reform of the gas distribution sector begun by the Letta Decree no. 164 of 23 May 2000. Such reform has not yet been clearly shaped due to the lack of call of competitive bids for the assignment of the gas distribution concessions for a 12-year gas distribution service period.

Tenders that, pursuant to the spirit of the Letta Decree, should have amounted to the principal way of fostering competition in the relevant market.

The above-mentioned 17-year delay was necessary to depict a more uniform national regulatory framework; these rules have outlined:

  1. the constitution of the ATEM (Ambiti Territoriali Minimi) for the adoption of the tenders (ATEMS amounting today to 177 in number);
  2. the criteria for the tenders calling and the determination of the offer, with a balance – in the determination of the tenders' scores – between economic and technical-qualitative elements with the latter, identified in the Ministerial Decree no. 226 of 12 November 2012 (the "Regulation"), being prioritized in the attribution of tenders' scores;
  3. the scheme of the standard service contact;
  4. the guidelines for the determination of the VR (Valore di Rimborso) that the new concessionaire (Gestore Entrante) will correspond to the old concessionaire (Gestore Uscente) unless a devolution free of charge is envisaged at the end of the concession (the "Guidelines").

Following issuance of the ministerial Guidelines for the calculation of the VR, we have witnessed a significant slowdown in the procedure for the calling of the tenders, which has come to almost a 'halt'. The latest appeals to the regional administrative court (Tribunale Regionale Amministrativo) advanced against the first tenders called and brought forward against the general misapplication of the discipline on tenders' rules (lex specialis), as well as the fact that the procedural rules to be followed were not respected (for example, due to the lack of communication of the same procedural rules by the AEEGSI to the interested parties), have contributed to the above-mentioned slowdown.

And so notwithstanding the fact that the regulatory framework foresaw additional powers directly exercisable by the Regions to be adopted towards the defaulting or delaying municipalities.

The lack of adoption of the just mentioned additional powers directly exercisable by the Regions, the penalties for the defaulting municipalities, and the concession of an extension to the terms for calling tenders that had not been called in due time (the vast majority of them) are all factors that have all contributed to further complicate (and delay) tender procedures.

As reminded by Sergio Miotto from the Consorzio Concessioni Reti Gas, and as strongly stigmatized during the workshop by the president of ANIGAS, Mr. Tani, as of today for more than 50% of the ATEMs the terms for the publication of the call for tenders have expired; only in January 2017 the offers for ATEM Milan 1, currently under evaluation, and only at the end of June 2017 the offers for ATEM Torino 2, have been submitted.

In regards to the above, the key messages emerged during the debate held at the workshop were pointing in the same direction:

  1. the promotion of accelerated procedures for the verification of the VR/RAB variations. It is reminded that, in case of concessions released following the Letta Decree, the VR (calculated on the basis of the Royal Decree no. 2578 of 15 October 1925, for the concession assigned before the Letta Decree) should be equal to the RAB (Regulatory Asset Base, acknowledged by the Tariff's system) but it is often not so;
  2. the reintroduction of penalties applicable to the defaulting ATEMs;
  3. the reintroduction of the possibility to exercise immediately the additional powers of the regions;
  4. the definition ex ante, by the AEEGSI, of the guidelines for the analysis of the benefits/costs of the subcontracting stations; and more generally
  5. the necessity to avoid to adopt discouraging measures that would jeopardize the chick off of the tenders.

These messages were fairly clear at ministerial level given that, a few days after the workshop, a story in a professional magazine appeared, according to which, due to the "continuous and numerous delays" in the ATEMs for the completion of the calls for tenders for the gas distribution service, the Italian Ministry of the Economic Development "was evaluating to assume designated officials to ensure the implementation of the calls for tenders, considering also their technical complexity" (declaration of the Italian Vice Ministro of the Economic Development, Ms Teresa Bellanova, who had further added that the MISE representatives "have activated, through regional coordination and with a collaborative spirit, a verification procedure at the Regions where the ATEM are present, for whom the deadlines for the "intervento sostitutivo" have passed; such recognition, still on going, is aimed at verifying the status of art of the tender procedures by the subcontracting stations to identify the causes of delays in the publication of the tenders and to identify as well, prior nominating designed officials, the possible solutions to be adopted to overcome the slowdowns").

In a similar context, the approval of the annual parliamentary draft (Disegno di Legge) for the market and the competition (DDL Concorrenza), intervened on August 2, 2017, has emerged with reference to the provisions contained therein and related to the gas distribution sector. In particular, the same annual parliamentary draft has:

  1. established that the verification procedure by the AEEGSI does not apply in case the competent ATEM self-certifies to have adopted the Guidelines and the variation “of the VR and the value of the net assets, net of the public funds in capital account (Contributi Pubblici in Conto Capitale) and net of private funds related to the so called “cespiti di località”, ambit aggregate, would not result above the 8% as long as the variation of the single municipality would not exceed 20%”;
  2. given mandate to the AEEGSI to adopt measures aimed at the simplification of the verification procedure of the tender documents, especially for those bids that do not set off from the standard documentation (e.g. standard bids, standard disciplines and standard service contracts).
  3. expressly established strict methods for the maximum scores awarding procedure envisaged by the Regulation for the adjudication criteria;
  4. expressly foreseen an enhanced support to the temporary group of companies (Raggruppamenti Temporanei di Impresa).

In particular, it has been envisaged that the requirements referred to at letters a), c) and d) of the Regulation may be held even by a single participant; as opposed, those requirement set forth at letter b) of the Regulation must be jointly held by all participants. In particular, letter b) of the Regulation established that the experience in management, beside through the ownership of the concession for gas distribution plants for a number of clients equal to the 50% of the number of clients that should benefit the new concession, could be demonstrated with a number of other conditions amongst which there are the availability of infrastructures, instruments and demanded manpower being these in compliance with the qualitative standards of the service that must be performed.

This has explicitly provided the possibility for an investment fund, that would fuel the necessary funds to demonstrate his ability to conduct the gas distribution service, to participate directly by way of temporary group of companies (Associazione Temporanea di Imprese, ATI) ever since the phase of preparation of the offers.

The DDL Concorrenza, now the Legge Concorrenza (Law on Competition; no. 124 of 4 August 2017), was published in the Official Gazette on August 14, 2017 and will be in force 15 days after its publication, on August 29, 2017. With the approval of such law, the Italian Parliament has rendered the market more attractive and overall more accessible (given its clear regulatory framework) to investment funds. The AEEGSI has now the power to rapidly enact all the provisions described above.