ACEA GROUP Quarterly Report for the nine months ended 30 September 2008

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(1)ACEA GROUP Quarterly Report for the nine months ended 30 September 2008. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. Board of Directors’ meeting of 10 November 2007.

(2) MANAGEMENT OF THE PARENT COMPANY. Board of Directors Giancarlo Cremonesi Andrea Mangoni Geminello Alvi Paolo Bassi Marco Maria Bianconi Massimo Caputi Jean Louis Chaussade Dino Piero Giarda Jacques Hugè. Chairman Chief Executive Officer Director Director Director Director Director Director Director. Board of Statutory Auditors Chairman Auditor Auditor Alternate Auditor Alternate Auditor. Consolidated quarterly report for the nine months ended 30 September 2008. 2. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. Maurizio Lauri Roberto Pertile Francesco Lopomo Claudio Bianchi Claudio Valerio.

(3) Acea Group financial highlights. page. 4. Introduction. page. 6. Segment information. page 10. Operating review. page 12. Basis of presentation and consolidation. page 53. Notes to the consolidated income statement. page 59. Financial position and cash flow. page 85. Acquisitions during the period. page 107. Other information. page 110. Declaration of the Executive Responsible for Financial Reporting. page 114. Operating and financial outlook. page 115. List of consolidated companies. page 118. Consolidated quarterly report for the nine months ended 30 September 2008. 3. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. CONTENTS.

(4) ACEA GROUP FINANCIAL HIGHLIGHTS. Consolidated net revenue Staff costs. 9M 2008. 9M 2007. 2,291,204. 1,816,355. Increase/ % increase/ (Decrease) (decrease). 474,849. 26.1. 197,269. 170,970. 26,299. 15.4. Cost of materials and overheads. 1,657,225. 1,281,598. 375,628. 29.3. Consolidated operating costs. 1,854,494. 1,452,567. 401,927. 27.7. 1,789. (6,057). 7,846. 129.5. Gross operating profit/(loss). 438,499. 357,731. 80,769. 22.6. Operating profit/(loss). 262,145. 196,786. 65,359. 33.2. Finance (costs)/income. (68,532). (51,820). (16,712). 32.3. 121. 39,942. (39,820). (99.7). Profit/(loss) before tax. 193,734. 184,907. 8,827. 4.8. Net profit/(loss) from continuing operations. 115,072. 109,898. 5,174. 4.7. Net profit/(loss) from discontinued operations. (68). 0. 0. 0.0. 115,005. 109,898. 5,107. 4.6. 5,051. 4,530. 521. 11.5. 109,954. 105,368. 4,586. 4.4. basic. 0.5163. 0.4948. 0.0215. diluted. 0.5163. 0.4948. 0.0215. Fair value of commodity derivatives. Profit/(loss) on investments. Net profit/(loss) for the period. Profit/(loss) attributable to minority interests. Net profit/(loss) attributable to the Group. Earnings/(loss) per share (€). Consolidated quarterly report for the nine months ended 30 September 2008. 4. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. €000.

(5) (€000). 30 Sept 2008 (A). 31 Dec 2007 (B). Increase/ (Decrease) (A-B). % increase/ (decrease) (A-B)/(B). Net invested capital. 3,114,697. 2,762,256. 352,441. 12.8. Shareholders’ equity. 1,412,103. 1,439,716. (27,613). (1.9). Net debt. 1,702,594. 1,322,540. 380,054. 28.7. Consolidated quarterly report for the nine months ended 30 September 2008. 5. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. BALANCE SHEET.

(6) INTRODUCTION. The consolidated results of operations for the nine months ended 30 September 2008 show: 1. consolidated net revenue up 26.1% 2. cost of materials and overheads up 29.3% 3. staff costs up 15.4% 4. gross operating profit up 22.6% 5. net profit for the period up 4.4%. The results for the period were influenced by the different method of consolidating Tirreno Power and Umbra Acque, the increase in the Group’s interest in GORI from July 2007 and the acquisitions of Solemme and Kyklos in July 2008. These changes contribute a total of 43.9 million euros to consolidated gross operating profit, including 39.1 million euros attributable to Tirreno Power. On a pro forma basis, enabling a like-for-like comparison of amounts with those of the previous year, gross operating profit for the first nine months of 2008 is 394.6 million euros, representing growth of 36.8 million euros (up 10.3%). On 1 October 2008 Acea and Acea RSE sold their equity interests in Acea Luce.. The performance for the period reflects growth of: (i) 107.1 million euros (20.2%) in the gross margin and (ii) of 26.3 million euros in staff costs, less capitalised costs, which is down 19 million euros after excluding the positive impact of the reform of staff. In terms of business segment: 9 water services recorded growth of 35.2 million euros in the gross margin, to which all areas of operation contributed; 9 energy generation witnessed a 52.8 million euro increase in the gross margin to 70.4 million euros, thanks to the positive contribution from Tirreno Power (44.4 million euros), the Leinì plant (which entered service in October 2007) and the re-entry into service of the Voghera plant, which was shutdown throughout the first half of the year; 9 energy distribution recorded a result substantially in line with the previous ninemonth period, ending the period with a gross margin of 197.4 million euros, which. Consolidated quarterly report for the nine months ended 30 September 2008. 6. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. termination benefits recognised in the previous nine-month period..

(7) marks a reduction of 1.4 million euros as a result of recognition in the previous year of income deriving from settlement of the dispute with the Authority over the value attributable to electricity network losses, the effect of which is mitigated by the good performances registered by the primary margin; 9 the gross margin generated by electricity and gas sales is 25.3 million euros, marking an improvement of 9.7 million euros; 9 public lighting activities recorded a gross margin of 25.6 million euros, marking an increase of 1.8 million euros; 9 waste to energy and waste management report an increase of 2.2 million euros in the gross margin, primarily attributable to SAO following the tariff review granted in August 2007 and the start-up of special waste treatment. The gross margin is also up as a result of the return of the 8.3 million euro fine imposed by the Antitrust Authority. This followed the favourable judgement handed down by Lazio Regional Administrative Court on 7 May, in response to the appeals filed by Acea and Suez. The court quashed all aspects of the Authority’s ruling (and thus the alleged existence of an agreement) and, as a result, the fine.. Growth in staff costs reflects the increase of 429 in the average headcount, the impact of the contract renewal and increases in a number of other components such as a review of grades resulting in average rises due to company reorganisations. ◊. Energy networks. 66.5 million euros (up 0.3 million euros). ◊. Energy generation and sales. 15.2 million euros (up 6.7 million euros). ◊. Italian water services. 109.9 million euros (up 13 million euros). ◊. Overseas water services. 3.3 million euros (up 0.3 million euros). ◊. Environment and energy. 5.6 million euros (up 0.4 million euros). ◊. Parent Company and Acea8cento. 28.1 million euros (up 1.9 million euros). Amortisation and depreciation is up 24.1 million euros, including 10.2 million euros attributable to Tirreno Power and Umbra Acque. On a like-for-like basis, the increase is thus 13.5 million euros. 4.6 million euros of the increase regards completion and entry into service of the Roselectra and Leinì plants and changes to the useful lives of the hydroelectric plants (following the Constitutional Court sentence of January 2008), whilst. Consolidated quarterly report for the nine months ended 30 September 2008. 7. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. The rise in staff costs can be seen across all business segments, as follows:.

(8) the residue regards the amount of investment carried out by Group companies during the current and previous years.. Net finance costs are up 16.7 million euros, with 6.5 million euros reflecting the change in the basis of consolidation. The result reflects both increased borrowing and rising interest rates, with the Parent Company recording a 11.2 million euro increase in finance costs on short- and medium/long-term borrowings.. Profit before tax of 193.7 million euros is up 8.8 million euros (4.8%). The size of the improvement reflects recognition in the previous nine-month period of 19.9 million euros payable by Electrabel on the basis of the Joint Venture Agreement, which requires the partner to make additional payments on the achievement of certain degrees of market liberalisation. After adjusting for this item, profit before tax is up 17.4%.. Overall tax expense for the period, on a pro forma basis to enable like-for-like comparison with the first nine months of 2007, is around 38.6%, marking a reduction of 2%. This tax rate is 2.2 percentage points higher due to the net effect of the reversal of a portion of tax assets recognised in 2006 and 2007 (5 million euros), the changes introduced by Law Decree 112/2008, and the benefit deriving from the decision to take advantage of the exemption provision introduced by the Finance Act for 2008.. Net profit attributable to the Group is up 4.4%, which after adjusting for the above. Net invested capital is up 12.76% (up 352.4 million euros) on the end of the previous year, with the increase amounting to 7.65% (211.4 million euros) on a like-for-like basis. The rise reflects increases in net working capital (up 42 million euros or 25.89%, and up 38.3 million euros or 23.63% on a like-for-like basis) and in net non-current assets (up 310.4 million euros or 11.94%, and up 173 million euros or 6.65% on a like-for-like basis). The increase in net working capital is due to: (i) a 166.1 million euro rise in current receivables (up 126.6 million euros on a like-for-like basis), above all those due from customers (up 135.9 million euros and 96.4 million euros on a like-for-like basis), (ii) a 49.8 million euro increase in other current assets (up 43.8 million euros on a like-for-like. Consolidated quarterly report for the nine months ended 30 September 2008. 8. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. income of 19.9 million euros recognised in the same period of 2007, rises to 19.4%..

(9) basis), and (iii) a 16.2 million euro increase in inventories (up 5.6 million euros on a likefor-like basis); partially offset by (i) an increase in other current liabilities (up 148.1 million euros and 126.4 million euros on a like-for-like basis), primarily reflecting tax expense for the period, and (ii) an increase in current payables (up 41.9 million euros), deriving from the greater amount payable to the Comune di Roma (up 31.5 million euros) and a rise in trade payables (up 7.6 million euros). On a like-for-like basis, current payables are up 11.2 million euros, reflecting an increase in amounts payable to the Comune di Roma, offset by a reduction in trade payables (down 23.1 million euros). At the end of the period the Group reports net trade payables of 3 million euros due to the Comune di Roma, after a decrease of 5.4 million euros with respect to 31 December 2007.. Investment during the period amounts to 283.1 million euros, marking an increase of 30.5 million euros compared with 30 September 2007 (up 20.3 million euros on a like-for-like basis). The movement reflects a 13.4 million euro reduction in investment in generation, following completion of the thermoelectric plants under construction, and an increase of 22.1 million euros in investment by the Group’s electricity distribution and water companies.. Net debt of 1,702.6 million euros at 30 September 2008 is up 28.74% or 380.1 million euros on the figure for the end of 2007. The increase reflects: (i) the debt of companies for which the method of consolidation was changed during the period and the debt of companies acquired during the period, accounting for 154.9 million euros (on a like-for-like basis net debt is 1,547.7 million. investment (up 30.5 million euros on the previous nine-month period) and the mismatch between the cost of procuring electricity and income from its sale (which is collected in subsequent periods), in addition to seasonal factors. Net debt at the end of the first nine months of each year is, in fact, higher than at the close of the previous financial year.. Consolidated quarterly report for the nine months ended 30 September 2008. 9. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. euros, representing an increase of 17.02% or 225.2 million euros); and (ii) growth in.

(10) SEGMENT INFORMATION. The following information is provided to facilitate understanding of the segment information below: -. the “Energy generation and sales” segment includes the companies in the AceaElectrabel Group, Eblacea and Tirreno Power;. -. distribution and public lighting are included in the “Energy networks” segment, which includes Acea Distribuzione, Acea RSE, Acea Luce and Ecogena;. -. analysis and research services are included in the “Engineering and laboratory services” segment, which includes Laboratori SpA;. -. the “Environment and energy” segment includes the TAD Group companies, Aquaser, Kyklos and Solemme.. statement, as a result of application of IAS 18, in particular with regard to the distinction between gross and net revenue. This distinction cannot be applied when presenting the revenues and costs of individual segments.. In order to ensure a correct presentation of the performance of each segment, amounts for the Distribution and Public Lighting segments for 2007 have been reclassified.. Consolidated quarterly report for the nine months ended 30 September 2008. 10. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. The figure for total revenue in the following table differs from the amount reported for consolidated net revenue in the consolidated income.

(11) SEGMENT INFORMATION Gross operating profit/(loss). Investment. Gross margin. 9M. 9M. 9M. 9M 2008. 2007. Increase/ (Decrease). 2008. Increase/ 2007 (Decrease). 2008. Increase/ 2007 (Decrease). 2008. Increase/ 2007 (Decrease). Generation. 295,376. 89,307. 206,069. 62,768. 15,420. 47,348. 16,500. 24,000. (7,500). 70,362. 17,543. 52,819. Distribution. 285,198. 273,051. 12,147. 152,183. 159,115. (6,932). 88,100. 87,300. 800. 197,398. 198,783. (1,384). 1,413,375. 1,126,409. 286,967. 17,773. 9,665. 8,108. 5,000. 1,700. 3,300. 25,308. 15,603. 9,704. 62,320. 53,451. 8,870. 17,782. 15,547. 2,235. 7,750. 6,500. 1,250. 25,567. 23,816. 1,751. Sales Public lighting Italian water services. 505,967. 447,114. 58,853. 164,931. 144,235. 20,696. 148,000. 124,300. 23,700. 259,248. 224,085. 35,163. Overseas. 10,842. 10,973. (131). 4,020. 3,370. 650. 200. 1,200. (1,000). 7,291. 6,385. 906. Analysis and research. 15,042. 13,956. 1,086. 4,329. 4,434. (105). 300. 300. 0. 9,962. 9,434. 528. Environment and energy. 52,062. 45,886. 6,176. 19,727. 17,872. 1,855. 9,600. 3,900. 5,700. 25,283. 23,096. 2,188. Corporate. 68,805. 65,932. 2,873. (5,976). (13,396). 7,420. 7,650. 3,400. 4,250. 21,828. 13,978. 7,850. 2,708,987. 2,126,078. 582,910. 437,537. 356,263. 81,273. 283,100. 252,600. 30,500. 642,247. 532,723. 109,524. 6,926. 7,708. (782). 1,934. 1,382. 552. 0. 2,877. 2,579. 298. Eliminations and adjustments. (409,387). (306,283). (103,104). (71). 85. (155). TOTAL GROUP. 2,306,526. 1,827,503. 479,024. 439,400. 357,731. 81,669. Total continuing operations. Discontinued operations. Consolidated quarterly report for the nine months ended 30 September 2008. 283,100. 0. 0. (5,082). (6,601). 1,519. 252,600. 30,500. 640,042. 528,700. 111,342. 11. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. Revenue.

(12) OPERATING REVIEW. ENERGY NETWORKS. DISTRIBUTION OF ELECTRICITY ON THE REGULATED AND FREE MARKETS. 2008 represents the first year of application of the tariff structure defined by the Electricity and Gas Authority (the Authority) in the “Transmission, Distribution and Metering Code for the regulatory period 2008-2011”, contained in Annex A of Resolution 348/2007. The previous tariff structure (for the regulatory period 2004-2007) provided for contemporaneous introduction of two equalisation mechanisms, one “general” and the other “company-specific”, designed to recognise the specific conditions under which Italy’s various distribution companies operate. These mechanisms have been confirmed for the new regulatory period. The mechanisms are partly based on analysis of parametric costs (general equalisation, which is mandatory), and partly on company-specific analyses carried out by the Authority (company-specific equalisation, which is optional). The general equalisation mechanism is the result of the restriction created by the single national tariff, which envisages the need to define tariff parameters based on the average nature of end users and the geographical area served.. service are influenced by the specific characteristics of the customers served and by external factors beyond the company’s control. It is therefore necessary to safeguard the economic efficiency and profitability of companies via adoption of compensatory measures to cover the higher costs incurred with respect to the tariffs. The general equalisation mechanisms for the costs and revenues deriving from distribution and metering for the years 2008-2011, which take account of the innovations introduced by resolutions 18/2008 and 30/2008, are as follows: •. equalisation of distribution service revenues;. •. equalisation of revenues deriving from increased returns designed to provide incentives for investments in distribution networks;. Consolidated quarterly report for the nine months ended 30 September 2008. 12. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. In reality, the costs effectively incurred by individual companies in order to provide the.

(13) •. equalisation of direct distribution costs on HV networks;. •. equalisation of direct HV/MV transformation costs;. •. equalisation of direct distribution costs on MV and LV networks;. •. equalisation of revenues from the supply of electricity to residential customers.. •. equalisation of revenues from the LV metering service;. •. equalisation of the marketing costs incurred by distribution companies in respect of LV customers;. •. equalisation of the cost of purchasing electricity used internally for transmission and distribution;. •. equalisation of the difference between effective and standard losses.. The equalisation mechanism designed to provide incentives for investments in distribution networks aims to offer distribution companies an increased return on invested capital. This measure aims to promote specific projects capable of developing distributed generation and improving voltage quality on the networks. When carrying out its annual review of distribution tariffs from 2010, the Authority has reserved the right to allocate a portion of the tariff components to cover these investments. This aims to ensure that the increased returns are only granted to companies who have effectively carried out such investments.. Resolution 30/2008 established the method for calculating the equalisation of revenues deriving from the LV metering service. The mechanism aims to guarantee that returns on investments in meters and electronic reading systems, and the right to depreciate retired. companies who have effectively carried out such investments. The equalisation mechanism also introduces penalties for distribution companies who do not comply with the obligation to install LV electronic meters set out in Resolution 292/2006. In the same resolution the Authority launched the new equalisation mechanism to cover the cost of marketing distribution services to LV customers, with a view to protecting the financial position of distribution companies. Two regimes are to be applied to distribution companies that have established a separate company to supply services subject to additional safeguards, and to those who have combined distribution services with the sale of electricity.. Consolidated quarterly report for the nine months ended 30 September 2008. 13. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. electro-mechanical meters to be replaced by electronic meters, are granted to distribution.

(14) Resolution 18/2008 amended the “Integrated Text of the Electricity and Gas Authority’s provisions governing the sale of electricity to end customers requiring additional safeguards and protection (the “Retail Service Code”), in accordance with Legislative Decree 73 of 18 June 2007”, approved with Resolution 156/07. This new resolution has established equalisation mechanisms for the cost of procuring electricity incurred by each provider of services to end customers subject to additional safeguards. The regulation governing load profiling requires electricity for customers subject to additional safeguards to be quantified on a residual basis, and to thus also include electricity consumed by retailers themselves in the distribution and transmission and the difference between the effective losses and standard network losses of distribution companies. In this resolution, therefore, the Authority has established the method of calculating amounts for equalisation relating to the procurement of electricity used in transmission and distribution, and to the value of the difference between effective losses and standard network losses to be recognised to each distribution company.. The company-specific equalisation mechanism takes account of the difference between the specific costs incurred by a company and the national average, where this difference is not covered by the general mechanism. To this end, the Authority is required to carry out an assessment at the request of each individual company, with the aim of identifying external factors beyond the company’s control that give rise to costs that are higher than those reflected in the tariffs, and that are not compensated for by the general equalisation mechanism. The Authority’s Resolution 30/08: has updated the company-specific correction factor for the regulatory period 2008-2011, bringing the amount for company-specific equalisation for each individual company into line with its effective investment; •. has put a value on the permitted effective costs incurred by distribution companies included in company-specific equalisation, using methods in line with those adopted in the determination of tariffs for the regulatory period 2008-2011;. •. supports combinations of distribution companies, awarding companies involved in business combinations an amount for company-specific equalisation equal to the sum of the amounts recognised for the individual companies;. •. restricts participation in company-specific equalisation to companies qualifying for the equalisation regime in the regulatory period 2004-2007;. Consolidated quarterly report for the nine months ended 30 September 2008. 14. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. •.

(15) •. has launched new investigations of individual companies, to be conducted by the Authority’s Tariff Department, to determine each company’s effective distribution costs for 2008;. •. requires the Electricity Industry Equalisation Fund to pay amounts for companyspecific equalisation for the years 2009, 2010 and 2011 based on the companyspecific correction factors updated pursuant to this resolution and permitted revenues subject to equalisation.. Further innovations introduced in the third regulatory period regard: •. determination of a mandatory tariff for the distribution service, to be fixed by the Authority and applied by each distribution company to its current and future counterparties. This arrangement thus replaces the system based on basic and special tariff options, as adopted for the distribution service during the second regulatory period and proposed by the various distribution companies;. •. a distinction between metering service costs with appropriate specific fees to be received by entities that install and maintain meters, collect meter readings and validate and record the readings;. •. definition of a dynamic mechanism for correcting permitted revenues to cover the cost of marketing the distribution service, with the aim of compensating for the existing imbalance between permitted costs and revenues deriving from movements in the volume of services provided;. •. the separation, from distribution revenues, of amounts resulting from application of fees for reactive energy withdrawal, now allocated to the cost of measures and. The new regulations have also changed the method of updating tariff components, meaning that: •. the portion of transmission and distribution tariffs covering operating costs is updated via the price-cap mechanism;. •. the part designed to provide a return on invested capital, will be updated on the basis of the gross fixed investment deflator, movements in the volume of services provided and the level of permitted investments, and the rate of variation linked to increased returns designed to provide incentives for investments in distribution networks;. Consolidated quarterly report for the nine months ended 30 September 2008. 15. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. initiatives designed to promote energy efficiency among end users of electricity..

(16) •. the part designed to cover depreciation has been updated, using the gross fixed investment deflator, movements in the volume of services provided and the rate of variation linked to the reduction in gross invested capital.. With regard to connection fees and fixed charges, in the document “Economic conditions for delivery of the connection service”, attached to Resolution 348/2007 as Annex B, the Authority has: •. established the procedural and economic conditions for delivery, to end customers, of the service connecting consumers to LV electricity networks with the obligation of connecting third parties;. •. defined additional economic conditions with respect to those established in Resolution 281/2005;. •. determined the procedural and economic conditions for delivery of the network connection service to distribution companies with the obligation of connecting third parties;. •. established the procedural and economic conditions for delivery of specific services (the transfer of equipment requested by users, contract transfers, transfers of supply, disconnections, etc…).. On 24 December 2007 the Electricity and Gas Authority (“the Authority”) issued Resolution 333/2007 regarding the third regulatory period from 2008 until 2011. Resolution 333/2007 introduces four different types of regulation, amending the two preexisting types and supplementing the current legislation, as follows:. 2. Individual standards regarding the number of outages for MV customers; 3. Regulation of the total duration of outages without significant advance warning; 4. Regulation of the average number of long and short outages.. The regulation of prolonged and extended outages (which were already regulated by the previous Resolution 172/2007) includes the rules that distributors must observe regarding the registration and monitoring of electricity distribution service continuity data in the case of prolonged outages affecting end customers.. Consolidated quarterly report for the nine months ended 30 September 2008. 16. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. 1. Regulation of prolonged and extended outages;.

(17) The resolution provides for reimbursement of LV and MV customers affected by outages, deriving from any voltage level within the electricity network and for whatever reason, which last longer than fixed standard limits. In accordance with the timeline, from 1 January 2008 to 30 June 2008 distributors must monitor prolonged and extended outages on an experimental basis, without incurring any charges. From 1 July 2008 to 31 December 2009 prolonged and extended outages must be registered, but no payment of compensation to end customers is envisaged. However, the data gathered will be used in calculating the amount of provisions allocated for exceptional events (held by the Equalisation Fund). As of 1 January 2010, taking into account Acea Distribuzione’s intention to supply electronic meters that record LV customer service outages, the regulations will be fully applied. In addition to the provisions made for exceptional events, customers affected by prolonged and extended outages will automatically receive compensation.. Moreover, the regulator has made some changes to the current regulations regarding individual standards for the number of outages for MV customers. As of 1 January 2008, any penalties will be calculated on the basis of outages suffered by each MV customer regardless of their installed power (under the previous regulations the limit was 500 kW, and subsequently 100 kW, under a graduated regime introduced in 2006). In addition, the standard regarding the number of prolonged outages for MV customers, based on area of concentration, has also been restrictive.. significant advance warning, the Electricity and Gas Authority revised the limits for calculating compensation relating to inefficiency penalties, raising the cost of failing to meet the set targets. A new method of categorising breakdowns was also introduced, and has had a significant impact on the company’s IT systems.. Finally, the Electricity and Gas Authority introduced an incentive mechanism, based on penalties and rewards, including with respect to the average number of outages. Specifically, the new regulations take account of the total average number of prolonged and short outages, although the latter are not included in calculating the duration.. Consolidated quarterly report for the nine months ended 30 September 2008. 17. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. Regarding the existing regulations relating to the total duration of outages without.

(18) The parameters set particularly high levels of compensation for the number of outages, and the targets are also very challenging.. As regards aspects of commercial quality, the main changes introduced by the above Resolution 333/07 for 2008 are the introduction of specific standards for certain services previously governed by a general standard (checks on metering groups and on voltage quality), and the introduction of specific standards for previously unregulated activities, such as power increases. From 2009, on the other hand, the punctuality range for appointments with customers is to be reduced from three to two hours and a new mechanism for calculating compensation has been introduced, with the amount rising in line with the delay in providing the service up to a maximum amount equal to three times the basic compensation. Compensation may also be cumulative for an end customer for a single service, should the service provider fail to meet both response and punctuality standards. This resolution has also extended the method of checking commercial quality used in the gas sector to the electricity sector. Above all, checks will be carried out during 2010 and will be made with reference to the figures for 2009. Any evidence of “invalid” and/or “non-compliant” figures will lead to application of the related penalties. A consultation process is currently underway with regard to the quality of commercial services involved in the sale of electricity and gas to end customers. This is expected to result in more stringent regulation of certain activities carried out by distributors. Operators are being asked for their views on the introduction, from 2009, of two new specific standards for response times in providing the following services: management of a complaint regarding the metering or distribution service, with the proposed standard being 15 working days; . verification of a meter reading, with the proposed standard being 5 working days.. Consolidated quarterly report for the nine months ended 30 September 2008. 18. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. .

(19) Regulatory environment 8 January 2008 – Electricity and Gas Authority Resolution 1/2008 regards adoption of the three-year strategic plan for the period 2008-2011. The general objectives set out in the document may be summarised as follows: •. to promote and develop competitive markets, including via harmonisation of the electricity and gas markets, containment of the power of dominant operators and support designed to ensure adequate supply;. •. to support and promote the efficiency and value for money of infrastructure services;. •. to protect energy consumers through the full deregulation of markets, on the demand side, and development of levels of service quality and security;. •. to promote rational use of energy and protect the environment by contributing to decisions regarding sustainable development;. •. to guarantee and implement regulations and oversee the correct application of regulations in respect of regulated entities;. •. to increase stakeholder dialogue and develop relations with the institutions by boosting consultation with operators and consumers;. •. to boost the Authority’s internal functionality and operating efficiency.. 14 January 2008 – Authority Resolution 1/2008 amended Annex A of Resolution 89/2007 regarding the technical/economic conditions for the connection of electricity generating plants to electricity networks, with the obligation to connect third parties, with. replace references to Interministerial Economic Planning Committee Regulation 42/86 with those in Annex B to the Code for 2008-2011.. 21 January 2008 – Authority Resolution 4/2008 governs electricity dispatching and transport services (transmission, distribution and metering) in the event of consumers in arrears or of non-performance by retailers. The document sets out: •. to protect the credit rights of retailers in the event of non-payment by consumers, in accordance with the need to ensure the transparency of information and accurate information on the timing of payments, and the consequences of non-. Consolidated quarterly report for the nine months ended 30 September 2008. 19. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. nominal voltage less than or equal to 1 kV. The amendments were necessary in order to.

(20) payment, and in the event of the retailer’s non-performance in respect of Terna or another distribution company; •. to protect the credit rights of the suppliers of protected services from the potentially opportunistic behaviour of consumers, ensuring that they have the opportunity to transfer their receivables for bills issued and not paid by consumers to a new retailer taking their place;. •. to provide that in the case of consumers served until three months before by a supplier of protected services, the new retailer, together with the switching request, can make an irrevocable offer to acquire the above receivable, suspensively conditional on the retailer still being the provider of the consumer in arrears at the time the receivable exists;. •. to transitionally define specific rules governing the suspension of supply in the event of non-payment by consumers with LV connections and not equipped with electronic meters, imposing certain information requirements on distribution companies;. •. to prepare, and subsequently introduce, further measures aimed at identifying appropriate procedures in addition to the suspension of electricity supply, capable of reducing credit risk associated with consumers;. •. to define, and subsequently introduce, methods designed to cover, in accordance with incentive mechanisms, the costs incurred by suppliers of services subject to additional safeguards and the suppliers of protected services in respect of customers in arrears who cannot be cut off, in addition to measures designed to. 28 January 2008 – Authority Resolution 5/2008 launched a procedure to lay down measures concerning the criteria for defining and attributing sums arising from any delayed adjustments made at the load profiling equalisation stage. The Authority believes it necessary to analyse instances of delayed adjustments of meter readings, in order to identify the operators involved in such adjustments and the effects such adjustments would have on sums deriving from load profiling equalisation, also taking account of the outcome of the related investigation launched by Resolution 177/2007. The Authority thus plans to introduce incentives based on bonuses and penalties, in relation to compliance with the requirements governing the method of load profiling equalisation,. Consolidated quarterly report for the nine months ended 30 September 2008. 20. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. limit such costs..

(21) and in line with a similar to those under examination for the review of the fees for the aggregation of readings, launched by Resolution 343/2007.. 4 February 2008 – Authority Resolution 1/2008 defined the procedures for implementing general equalisation, as established in Annex A to Resolution 5/2004, for electricity generation and distribution cooperatives during the period 2004-2006, delaying definition of the procedures for 2007 until a later date.. 7 February 2008 – Authority Resolution 10/2008 amended Annex A of Resolution 156/2007 (the “Retail Service Code”). The Authority believes it necessary: •. to provide for application of a fixed contribution if a new withdrawal point is activated or a previous one is disconnected, and also if a consumer requests disconnection, regardless of whether or not the supply is of a seasonal nature;. •. to provide for application of the same contribution to services relating to changes in the power supplied;. •. to correct material errors discovered after publication of resolutions 311/2007 and 349/2007.. 14 February 2008 – Authority Resolution 15/2008 amended and added to Resolution 157/2007 concerning access to the database for making commercial offers for the supply of electricity and/or natural gas. The main changes introduced include: •. the introduction of measures regarding coverage of the costs incurred by electricity and natural gas distributors in implementing rules concerning access to. correct use of databases; •. definition of the databases and the timing of implementation of the preparations necessary before the exchange of data between distributors and retailers can be operative;. •. the promotion and adoption, also jointly by several distributors, of dedicated telecommunications platforms, providing standardised tools for exchanging databases necessary in order to minimise the costs incurred by retailers and linked to each request for access to the data;. •. identification of an initial phase of implementation of the measures in this resolution, during which distributors must carry out investments and incur the. Consolidated quarterly report for the nine months ended 30 September 2008. 21. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. databases, and definition of limits and obligations, for retailers, regarding the.

(22) operating costs necessary in order to adapt their information systems to enable them, from 1 October 2008, to manage retailers’ requests for access to databases; •. identification of a phase of implementation of the measures in this resolution, following the transition period, during which distributors must carry out investments and incur the operating costs primarily needed to update and maintain their information systems, so that they are able to readily respond to requests for access to databases by retailers and transmit the continually updated data to them;. •. recognition of operating costs linked to the distributor’s activities during the transition period, based on the average cost obtained via critical analysis of proposals provided by distributors;. •. coverage of the above operating costs through a specific tariff component to be applied to consumers to which the treatment of the databases relates;. •. coverage of the costs incurred by distributors, following the transition period, through ordinary annual tariff updates, to be applied only to consumers to which the treatment of the databases relates.. 20 February 2008 – Authority Resolution 16/2008 contained urgent measures concerning the publication of data on the change in residual area withdrawals, following changes to the hourly treatment of withdrawal points (amendment of Annex A of Resolution 278/2007 – the “Load Profiling Code”). With effect from 1 April 2008, the hourly load profiling regulations for the withdrawal of electricity, as defined by Resolution 118/2003, have been replaced by load profiling by time band, as defined in the. available wattage in excess of 55 kW and equipped with electronic meters “in service” (remote operation).. 21 February 2008 – Authority Resolution 17/2008 contained measures concerning load profiling equalisation for the first quarter of 2008, designed to align the measures in Resolution 118/2003 with those in Annex A of Resolution 278/2007 (the Load Profiling Code).. 21 February 2008 – Authority Resolution 18/2008 introduced equalisation of electricity procurement costs for services subject to additional safeguards and defined settlement. Consolidated quarterly report for the nine months ended 30 September 2008. 22. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. Load Profiling Code, extending hourly treatment to all LV withdrawal points with.

(23) mechanisms between the Single Buyer and suppliers of services subject to additional safeguards following quantification of the amounts relating to load profiling. The measure aims to complete the regulatory framework introduced by Resolution 156/2007 “Integrated Text of the Electricity and Gas Authority’s provisions governing the sale of electricity to end customers requiring additional safeguards and protection (the “Retail Service Code”) – by defining equalisation mechanisms for electricity procurement costs incurred by each supplier of services subject to additional safeguards in serving consumers, and by regulating amounts, between suppliers of services subject to additional safeguards and distribution companies, for electricity used by the companies themselves in distribution and transmission and “differential losses”.. 26 February 2008 – Authority Resolution 7/2008 warned grid operators to comply with measures regarding the communication of electricity meter readings to calculate incentives for solar power plants.. 26 February 2008 – Authority Resolution 8/2008 closed the investigation launched with Resolution 290/2007 into the procedures and timing for provision of the grid connection service for electricity generating plants by distribution companies, with particular regard to plants using renewable energy sources.. 26 February 2008 – Authority Resolution 16/2008 confirmed, for 2008, the rate at which entities operating in the electricity and gas sectors contribute to funding the activities of the Electricity and Gas Authority, amounting to 0.3 per thousand of revenues for 2007, as. Operators must pay the contribution by 31 July 2008 and send the relevant declaration to the Authority by 15 September 2008, containing self-certification pursuant to law by the legal representative, in accordance with Resolution 143/2007.. 28 February 2008 – The Authority published consultation document 5/2008 – setting a deadline of 30 March 2008 – with the aim of defining the “Integrated text of the technical and economic conditions for grid connection with the obligation to connect third-party generating plants” (the “Code for active connections”). This process had already been launched with consultation document 32/2007, which was further developed as a result of. Consolidated quarterly report for the nine months ended 30 September 2008. 23. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. reported in the latest approved financial statements..

(24) the outcome of the fact-finding inquiry into the state of the grid connection service for generating plants contained in Resolution 290/2007.. 5 March 2008 – Authority Resolution 25/2008 introduced compensation of electricity marketing costs incurred by suppliers of services subject to additional safeguards in 2008. The mechanism is capable of settling any differences between revenues deriving from application of the sales and marketing revenues component (as defined by paragraph 9bis.1 of the Retail Service Code) and permitted marketing costs. The mechanism applies to all suppliers of services subject to additional safeguards, operating as separate companies (that is companies that, as provided for by the Law Decree of 18 June 2007, provide services subject to additional safeguards via a specific organisation, separate from the distribution company and operating in an area with more than 100,000 consumers).. 5 March 2008 – Authority Resolution 26/2008 established the following with regard to the provision of the service for protected categories awarded by competitive tender: •. the information regarding eligible end customers without an active free market supply contract , which must be made available by distribution companies to the provider of the protected service in order to activate the service, so as to facilitate both the billing of transport and sales charges and fulfilment, by the provider, of the reporting obligations established under the Retail Service Code;. •. that the distribution company must supply the new provider of the protected service with a copy of the contract for the electricity transmission and distribution. located in the distributor’s catchment area.. 12 March 2008 – Authority Resolution 29/2008 introduced electricity withdrawal profile conventions for public lighting users not treated on an hourly basis. The Authority believed it necessary to introduce new profiling conventions, based on the proposals in consultation document 24/2007 of 18 June 2007. The new methods are to come into force at the same time as the procedure for profiling by time band set out in the Load Profiling Code.. Consolidated quarterly report for the nine months ended 30 September 2008. 24. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. service for withdrawal points of end customers in protected categories and.

(25) 13 March 2008 – Authority Resolution 30/2008 amended and added to the Code for 2008-2011 and introduced measures regarding the economic conditions of the grid connection service. The measures provide for: •. introduction of two distinct equalisation regimes for marketing costs, one to be applied to distribution companies that have established a separate company to supply services subject to additional safeguards, and one to those who have combined distribution services with the sale of electricity one the market subject to additional safeguards, with a view to protecting the financial position of distribution companies;. •. an equalisation mechanism for revenues deriving from the LV metering service. The mechanism aims to guarantee that returns on investments in meters and electronic reading systems, regarding LV withdrawal points, and the right to depreciate electro-mechanical meters retired early to be replaced by electronic meters, are granted to distribution companies who have effectively carried out such investments;. •. introduction of penalties for distribution companies who do not comply with the obligation to install LV electronic meters set out in Resolution 292/2006;. •. updating of the Special Tender Provisions for the period 2008-2011, bringing company-specific equalisation for each company into line with the effective level of its investments;. •. determination of the share of the unit V1 and D1 tariffs to cover direct HV distribution marketing costs, and direct costs of transformation from HV to MV, as defined by articles 36 and 37 of the Code for 2008-2011; indexation of standard direct unit costs, confirming the relevant ratios, associated with the different types of plant, used in the second regulatory period.. 18 March 2008 – Authority Resolution 33/2008 approved the technical conditions for grid connection for end users that supply or withdraw electricity from distribution networks with voltages greater than 1 kV. This resolution also approved the document setting out the criteria for completion and submission of the declaration of compliance, as established by Resolution 333/2007, for the purposes of attestation of the technical requirements to be met in order to qualify for automatic indemnities in the event of noncompliance with the specific service continuity standard for MV customers.. Consolidated quarterly report for the nine months ended 30 September 2008. 25. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. •.

(26) 27 March 2008 – Authority Resolution 36/2008 contained urgent measures for the launch of hourly treatment for the purposes of dispatching for LV withdrawal points with available wattage in excess of 55 kW (amendments to Annex A of Resolution 278/2007 – the Load Profiling Code). From 1 April 2008, the Load Profiling Code has introduced load profiling by time band: all VHV, HV, MV and LV withdrawal points (in the latter case limited to points with available wattage in excess of 55 kW), if equipped with hourly or electronic meters, must be treated on an hourly basis (that is to say: reading and use of hourly withdrawal profiles for the appropriate technical and commercial purposes) from the first day of the conventional two-monthly period following the entry into service of the meter with which they are equipped, or from the first day of the second subsequent conventional two-monthly period, where entry into service of the meters takes place during the last fifteen days of the month. The Authority believes it necessary to put off hourly treatment of LV withdrawal points with available wattage in excess of 55 kW, which are not subject to hourly treatment at 31 March 2008, by six months for dispatching purposes. It has done this while maintaining the obligation to record hourly withdrawals for such points (according to the procedures and timing provided for in the Load Profiling Code) and to make the data available, pursuant to the Retail Service Code and Resolution 111/2006.. 28 March 2008 – Authority Resolution 37/2008 updated the economic conditions for the sale of electricity on the protected market for the quarter April - June 2008.. 28 March 2008 – Authority Resolution 38/2008 updated the tariff components designed. April - June 2008, issuing measures regarding the Electricity Industry Equalisation Fund.. 28 March 2008 – Authority Resolution 42/2008 introduced regulations for dispatching and transport (electricity transmission, distribution and metering) in the event of one dispatching user taking the place of another on the same active withdrawal point, or the attribution to a dispatching user of a new or previously disconnected withdrawal point (switching). This resolution holds it necessary: •. to define rules governing switching limited to certain essential profiles, in order to ensure application from 1 April 2008;. Consolidated quarterly report for the nine months ended 30 September 2008. 26. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. to cover general electricity system charges and additional components for the quarter.

(27) •. in accordance with the provisions of Resolution 118/2003, to ensure that switching takes effect from the first day of the second month after the one in which the request is received by the distribution company;. •. to require the outgoing dispatching user to communicate cancellation of the supply contract to the distribution company, also establishing the items of information to be communicated and the timing to be complied with by the distribution company, with regard to the reporting of material errors and communication to the outgoing dispatching user;. •. to require suppliers of services subject to additional safeguards to communicate a customer’s non-compliance with the requirements for inclusion in the additional safeguards category pursuant to article 4 bis of the Retail Service Code;. •. to define specific procedures where switching involves a new or disconnected withdrawal point, requiring that the timing of inclusion of the withdrawal point for which requests have been received in the dispatching contract should coincide with the expected timing of the start-up of supply;. •. to provide for a transition period in order to allow distribution companies to finalise the appropriate IT procedures, putting of the obligation to make available historical meter readings until 1 October 2008.. 31 March 2008 – Authority Resolution 43/2008 amended Annex A of Resolution 111/2006 concerning the launch of the standard determination of time bands for the purposes of the dispatching service. The Authority believes it necessary to update the resolution to take account of the measures introduced by the Load Profiling Code and the. code for the previous regulatory period.. 31 March 2008 – Authority Resolution 44/08 initiated the process of defining the minimum content of the directory of withdrawal points and the procedures for communicating this content to dispatching users by distribution companies.. 31 March 2008 – Authority Resolution 45/2008 amended the time limit for submitting switching requests for withdrawal points owned by Rete Ferroviaria Italiana SpA. The term of 1 May 2008 established by paragraph 3.3 of Resolution ARG/elt 42/2008 was thus moved to 18 April 2008.. Consolidated quarterly report for the nine months ended 30 September 2008. 27. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. Transport Code, and the consequent repeal of Resolution 118/2003 and the associated.

(28) 21 April 2008 – With regard to the application of the special tariff regime for Ferrovie dello Stato SpA, Authority Resolution 47/2008 introduced amendments assigning management of application of the A and UC components, relating to withdrawal points in operation at 31 December 2004 and involved in the supply of electricity for railway use alone, directly to the Electricity Industry Equalisation Fund. As a result, the resolution requires distributors not to apply the above tariff components for such points.. 21 April 2008 – Authority Resolution 48/2008 established that producers who have entered into electricity supply agreements pursuant to 34/05 may, by 31 May 2008, request grid operators who are counterparty to the agreements to retroactively modify, for 2007, the decision to define the price of the electricity withdrawn on the basis of time bands, thereby applying a single undifferentiated price across different time bands. As a result, grid operators will, by 30 June 2008, apply the necessary equalisations for 2007 to the prices applied in accordance with 34/2005, based on the type of remuneration indicated by the producer.. 9 May 2008 – Authority Resolution 56/2008 issued measures concerning the terms and conditions of the protected service and obligations to register and disclose withdrawal statistics. Based on these measures, end customers may request protected service providers to apply tariffs that vary according to time band. As a result, the provider should request the distributor to start applying time bands pursuant to the Load Profiling Code. Where compatible with the type of meter, the distributor is therefore obliged to start. the free market retailer) has made a request. Moreover, in the case of withdrawal points subject to undifferentiated tariffs pursuant to the Load Profiling Code, that are equipped with electromechanical meters or with electronic meters that are not programmed to record consumption by time band, and with available wattage of less than 15 kW, the distributor must attempt to read the electricity meters: o. at least once a year, for points with available wattage not over 15 kW;. o. at least once a month, for points with available wattage over 15 kW.. 14 May 2008 – Authority Resolution 28/2008 established:. Consolidated quarterly report for the nine months ended 30 September 2008. 28. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. applying time bands for withdrawal points for which the protected service provider (or.

(29) •. an “Information Centre for energy consumers” for the receipt and assessment of complaints, reports and observations made by end customers and, additionally, a call centre information service, with the aim of providing end customers with general information on electricity and gas market liberalisation, consumer protection regulations introduced by the Authority, and any complaints or observations sent by individual end customers;. •. that, from 1 July 2008, implementation and operation of the Information Centre is to be financed by the Electricity Industry Equalisation Fund;. •. that operators must respond to requests for information received by the Information Centre within the deadlines established by the Centre;. •. that the Centre should be flanked by a group set up to co-ordinate consumers’ associations, with the aim of promptly reporting common practices among operators and any general issues, and of proposing improvements to consumer protection regulations.. 14 May 2008 – Authority Resolution 43/2008 approved the 2008 programme of inspections for distribution companies with regard to service continuity data for 2007.. 20 May 2008 – Authority Resolution 62/2008 instructed the Electricity Industry Equalisation Fund to pay, by 30 June 2008, 80% of the amount paid for 2004, subject to adjustment, to each company that benefits from company-specific equalisation as an advance on the amounts due from 2005, 2006 and 2007.. 47/2008, establishing that the list of withdrawal points qualifying for inclusion in the special tariff regime for Ferrovie dello Stato SpA may be revised with the addition of new points, or the cancellation or modification of existing points, thereby cancelling the requirement to take only into account points in operation at 31 December 2004.. 26 May 2008 – Authority Decision 26/2008 launched the group set up to co-ordinate consumers’ associations provided for in Resolution GOP 28/2008, with the aim of promptly reporting common practices among operators and any general issues, and of proposing improvements to consumer protection regulations. The aim is to strengthen consumer protection, also on the basis of objective documented evidence.. Consolidated quarterly report for the nine months ended 30 September 2008. 29. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. 20 May 2008 – Authority Resolution 63/2008 added to the provisions of Resolution.

(30) 29 May 2008 – Authority Resolution 70/2008 established that the 60-day term, introduced by Resolution 267/2006, for the entry into force of the Directive on transparency in electricity bills issued to free-market, non-residential LV customers (Resolution 152/2006), shall start from 1 August 2008. The 60-day term will enable the Authority to define the obligations regarding the underlying information flows between distributors and retailers.. 3 June 2008 – Authority Resolution 74/2008 approved the On-the-spot Trading Code, which has now been extended to high efficiency cogeneration plants with capacity of up to 200 kW, in addition to renewable energy plants with capacity of up to 20 kW. The new provisions will replace those introduced by Resolution 28/2006 from 1 January 2009, with the earlier resolution being repealed. The On-the-spot Trading Code thus establishes that: •. the role of commercial intermediary for entities engaging in on-the-spot trading is to be the Electricity Services Operator;. •. distributors are thus required to promptly contact the current parties to contacts that any existing contractual arrangements shall no longer be valid from 2009 and that it is necessary to execute a new contract with the Electricity Services Operator;. •. by 30 September 2008 distributors are required to communicate all the information needed to manage the contracts in question to the Electricity Services Operator; by 25 February 2009 distributors are required to communicate the balances of electricity injected and withdrawn to the Electricity Services Operator and to parties to on-the-spot trading contracts (applicants). These balances are to be calculated pursuant to Resolution 28/2006 and refer to the period 1 January-31 December 2008 together with, in the case of the Electricity Services Operator alone, data regarding production incentives for 2008, broken down by applicant.. 12 June 2008 – The Authority published consultation document 18/2008 – setting a deadline of 28 July 2008 – which, with regard to the quality of commercial services involved in the sale of electricity and gas to end customers, proposes more stringent. Consolidated quarterly report for the nine months ended 30 September 2008. 30. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. •.

(31) regulation for distributors via the introduction, from 2009, of at least two new specific standards for response times in providing the following services: •. management of a complaint regarding the metering or distribution service, with the proposed standard being 15 working days;. •. verification of a meter reading, with the proposed standard being 5 working days.. 17 June 2008 – Authority Resolution 78/2008 revised the timing for general equalisation for the years 2005-2007 and extended the deadlines for verification of constraint V1 for 2007, establishing that: •. within 30 days of publication of the resolution, distributors must communicate to the Electricity Industry Equalisation Fund any adjustments or additions with respect to the data previously communicated with regard to equalisation for 2005;. •. distributors may ask the Fund to advance up to 80% of the provisional amount of equalisation for 2006, which the Fund is to determine within 30 days of publication of the resolution. The Fund must also define the final amount for equalisation for 2006 once Terna and the Single Buyer have determined the extent of equalisation and any adjustments have been communicated by distributors;. •. the deadlines for equalisation for 2007 have been suspended until further notice, whilst the deadlines for verification of constraint V1 for 2007 have been extended by 75 days;. •. distributors that announce further changes to the data necessary to calculate equalisation, in addition to the data already communicated, will be subject to. •. following quantification of the amounts for equalisation for electricity production and distribution cooperatives for 2005 and 2006 pursuant to Decision 1/2008, the Authority will rule on the settlement of amounts for equalisation for these years applicable to other operators.. 20 June 2008 – Authority Resolution 79/2008 introduced changes and additions to Annex A to Resolution 144/2007, relating to the termination of electricity and natural gas supply contracts, to take better account of the difference between free market conditions and protected market regimes, to correct a number of material errors and revisit the timing of certain aspects of the termination process.. Consolidated quarterly report for the nine months ended 30 September 2008. 31. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. administrative sanctions pursuant to Resolution 95/2007;.

(32) 23 June 2008 – Authority Resolution 35/2008 provided for implementation of a standard electronic communication protocol designed to dematerialise information flows between the Authority and companies operating in the electricity and gas sectors. These information flows regard: •. declarations from the above companies, pursuant to Resolution 143/2007, attesting to payment of their contribution to funding the Authority’s activities;. •. requests for data, on the part of the Authority, to create a census of entities operating in the electricity and gas sectors.. 27 June 2008 – Authority Resolution 86/2008 updated, for the quarter from July to September 2008, the tariff components to cover general electricity system costs and additional components, issuing instructions for the Electricity Industry Equalisation Fund.. 7 July 2008 – Authority Resolution 7/2008 issued instructions for the Electricity Industry Equalisation Fund regarding a tariff contribution for the achievement of energy savings objectives for 2007, pursuant to Resolution 219/2004. The Authority has granted the Fund a mandate to pay, within 30 days of the date of receiving the ruling, the budgeted total annual tariff contributions, fixing the amount payable to Acea Distribuzione SpA at 1,559,600 euros.. 22 July 2008 – Authority Resolution 68/2008 launched a fact finding investigation into possible irregularities in the application of regulations governing the service for protected. operators, business associations and end customers, who have reported certain irregularities in provision of the service, with particular regard to the following aspects: •. correct communication of personal and consumption data by providers of the service on a transitional basis to new providers, selected as a result of the envisaged competitive procedures;. •. correct management of switching procedures and compliance with reporting requirements by distributors in relation to activation of the service for protected categories;. •. billing procedures for end customers in the protected categories.. Consolidated quarterly report for the nine months ended 30 September 2008. 32. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. categories in the electricity market. The investigation follows an initiative by a number of.

(33) The above reports indicate conduct with an impact on the operations of the entities concerned, and risks capable of compromising provision of the service for protected categories.. 23 July 2008 – Authority Resolution 99/2008 contains the “Integrated text of the technical and economic conditions for grid connection with the obligation to connect third-party generating plants” (the “Code for active connections”). Annex A, which forms an integral and substantial part of this ruling, comes into effect from 1 January 2009.. 4 August 2008 – Authority Resolution 107/2008 introduced changes and additions to Resolution 280/2007, relating to the dedicated withdrawal of electricity pursuant to article 13, paragraphs 3 and 4 of Legislative Decree 387/03 and paragraph 41 of Law 239/04. With regard the dedicated withdrawal of electricity, the Electricity Services Operator settles with Terna the amount to be paid for the transmission service provided for by article 16, paragraph 16.1 of the Code for 2008-2011 and settles with distributors the amounts to be paid for the transport service provided for by article 13 of the Transport Code. To this end, and only with regard to electricity covered by dedicated withdrawal, distributors are to pay the Electricity Services Operator, as opposed to electricity producers, the amount provided for by article 13, paragraph 13.1, letter b) of the Transport Code.. 4 August 2008 – Authority Resolution 110/2008 introduced provisions governing determination of amounts relating to the electricity dispatching service for 2006,. payment for transmission and distribution, by each user of the dispatching service in 2006. Terna is then to make the data available to dispatching users, issuing bills to users to cover adjustments to dispatching charges for electricity injected and withdrawn in 2006.. 6 August 2008 – Authority Resolution 117/2008 established the procedures for applying the expenditure compensation regime for the supply of electricity paid for by disadvantaged residential customers, as defined pursuant to the Interministerial Decree of 28 December 2007. The Resolution provides for:. Consolidated quarterly report for the nine months ended 30 September 2008. 33. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. requiring distributors to send Terna monthly data for withdrawals of electricity, subject to.

(34) •. implementation of the compensation system in accordance with the provisions of the Decree of 28 December 2007, establishing that the entity in the electricity chain authorised to receive certification of the right to benefit from the compensation, and to pay the compensation itself, is the distributor;. •. establishment, with effect from the fourth quarter of 2008, of a new tariff component A (AS), designed to cover the cost of compensation and to be applied to all users;. •. the right of distribution companies to keep sums deriving from application of component AS, up to the value of the compensations paid, in order to minimise the need to transfer funds from distributors to the Electricity Industry Equalisation Fund;. •. reform of the tariff system applicable to all residential users with effect from 1 January 2009, confirming tariff D1 as the “Base tariff” and establishing a series of consumption categories for transport service charges, not only for customers who pay tariff D2 but also for those with tariff D3;. •. the introduction of specific provisions designed to facilitate the effective and rapid launch of the centralised information system needed to ensure orderly and unified management of relations between municipal authorities, who by order of the Decree of 28 December 2007 are responsible for collecting applications for access to compensation, and distribution companies, to whom the Authority has assigned responsibility for making the related payments;. •. recognition of the costs incurred by distribution companies as a result of the ruling’s provisions, via ordinary procedures for updating distribution tariffs; launch of the compensation system in the fourth quarter of 2008, also providing for compensation to be paid with retrospective effect from 1 January 2008 to rightful beneficiaries who have submitted an application by 29 February 2009.. 6 August 2008 – Authority Resolution 119/2008 applied the second edition of Italian Electrotechnical Committee Standard 0-16 for grid connections with voltages in excess of 1 kV.. 6 August 2008 – The Authority published consultation document 28/2008 – setting a deadline of 29 September 2008 – as part of the process of establishing criteria for defining and attributing sums arising from any adjustments to metering data after the. Consolidated quarterly report for the nine months ended 30 September 2008. 34. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. •.

(35) deadlines set by Resolution 278/2007 (the “Load Profiling Code”) for the load profiling equalisation stage. The Authority thus intends to introduce a transparent, nondiscriminatory procedure for managing these delayed adjustments, combining the need to correctly reconstruct the physical and financial amounts attributable to the various end users of the dispatching service with the need to minimise the necessarily related administrative impact. This document thus illustrates the different types of adjustment to metering data that may result in changes to both the quantification of physical amounts of electricity and the related financial values.. 11 September 2008 – Authority Resolution 122/2008 amended Annex A to Resolution 156/2007 (the “Retail Service Code”) and Resolution 337/2007, relating to competitive tenders and the provision of the service for protected categories. The main aim is to allow operators to offer their services in several geographical areas, including via revision of the composition of such areas. Distributors will be required to confirm to the new provider of the service for protected categories (according to the same timing for switching as defined by Resolution 42/2008) the completed transfer of the withdrawal points of protected customers to its dispatching point.. 23 September 2008 – Authority Resolution 132/2008 drew up guidelines for preparation of the programme of requirements to be met by independent operators for the purposes of unbundling, in accordance with the provisions of Resolution 11/2007 (the “Unbundling Code”). The essential criteria behind the ruling is that the independent operator must adopt a series of organisational and operational measures, the minimum requirements for. unbundling. The main requirements established by the resolution as regards the programme of requirements are the following: •. governance of the functionally unbundled activity;. •. individual, regarding the components of the independent operator, the guarantor for sensitive data and management, within specific limits;. •. organisational, with identification of the organisational structure relating to the unbundled activity;. •. operational, relating to the decision-making hierarchy, the procedure for preparing and approving the entity’s budget and its annual and long-term. Consolidated quarterly report for the nine months ended 30 September 2008. 35. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. which are to be fixed by the Authority, that will enable it to achieve the goal of functional.

(36) infrastructure development plan, the procedure for controlling the unbundled annual accounts and other critical operating procedures linked to the unbundled activity; •. contractual, with regard to relations with third parties and, above all, related parties, and the procurement of goods and services by the independent operator;. •. confidentiality, regarding management of commercially sensitive data, above all in relation to the physical separation of databases;. •. behavioural, with preparation of a code of conduct to be expressly accepted by the independent operator and its staff on execution or renewal of contracts, providing also for a training/information plan;. •. procedural, regarding the Authority’s counterparty (the independent operator itself) in relation to implementation of the programme of requirements and periodic reporting to the Authority.. The above requirements are to be implemented in accordance with a series of deadlines during 2009. Moreover, within 90 days of the resolution coming into force, the Authority must receive the programme of requirements and the first report on the measures taken in application of the programme. Once fully operational, this report will be sent to the Authority by 31 March of each year, detailing execution of the programme of requirements updated to the previous calendar year.. 23 September 2008 – Authority Resolution 134/2008 launched a procedure that aims to design a centralised information system to manage the profiles of end customers for electricity and gas, containing data regarding the metering of withdrawals, personal data,. customers. In addition, this resolution establishes that the brief of the working group set up by Resolution 294/2006 should be extended to include the definition of proposals designed cover the regulation of communication standards, as provided for by the Authority for entities operating in the gas and electricity sectors, bearing in mind the specific characteristics of the latter with respect to the gas sector. This process is also to involve the trade associations that represent electricity distribution companies and retailers.. 25 September 2008 – Authority Resolution 135/2008 introduced new regulations regarding load profiling, establishing that it is necessary to supply further historical. Consolidated quarterly report for the nine months ended 30 September 2008. 36. WorldReginfo - 0e517d5e-287f-4dc4-a0f2-1f031bc8efad. and, eventually, information about critical issues and the contractual compliance of end.