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Gas distribution

2010 is the second year of the third regulatory period (2009-2012) for gas distribution and measurement tariffs. The regulatory reference for this four-year period was introduced by resolution AEEG arg/gas no. 159/08 of November 2008 and is in many respects highly innovative compared to previous methodologies.

The tariff structure set out by resolution 159/08 ensures each operator the achievement of certain permitted revenues calculated by the AEEG based on the recognized costs and the delivery points served, effectively making the company's revenue independent from the volume distributed during the period. This is possible through appropriate mechanisms for tariff equalization, allowing operators to adjust, through the adjustment fund, the difference between their permitted and invoiced revenue to the sellers. Finally, the latter derives from the application of compulsory tariffs determined by AEEG for macro-regional areas and of equal level for all operators.

The reference document for 2010 for approval of the restrictions on company revenues is resolution arg/gas no. 115/10 of July 2010, while the compulsory tariff levels were determined under resolution arg/gas no. 206/09 of December 2009. However, we should note, that following the Lombardy Regional Court ruling of October 2010, partially cancelling resolution 159/08, the AEEG formally initiated, by resolution arg/gas no. 235/10 of December 2010, a procedure aimed at evaluating the resulting changes to the tariff regulations. Therefore, approvals of the 2010 revenue restrictions decided by the AEEG under resolution no. 115/10, on which the 2010 revenues were identified, are not to be considered definitive. However, we should note that the partial cancellation of resolution 159/08, in addition to referring to a first instance ruling, regards regulatory plant specifics for which any changes to the AEEG study would have a presumably fairly neutral effect on HERA SpA, if not a beneficial effect with respect to the previously approved restriction levels.

Finally, in 2010, the data Adjustment Fund reporting process to calculate the 2009 equalisation balance took place. The understanding of the reporting logic and the calculation of the equalisation amounts by the Adjustment Fund, duly defined for the first time in 2010, therefore led to the need to partially adjust the previously estimated revenues pertaining to 2009, and give the opportunity to make a more precise estimate of the 2010 equalisation amounts, therefore assuming an adequate degree of caution.

Against this backdrop, revenues for HERA SpA in relation to the gas distribution and metering activities amounted to Euro 149.2 million, with distribution volumes of 2,330 million cubic metres, and a corresponding average revenue per unit of Euro cents 6.4 per cubic metre.

Gas distribution and metering - regulated revenues20092010% Change
Hera Spa   
 Revenues (millions of €)143.80149.203.80%
 Volumes (millions of cubic metre)2,179.002,330.006.90%
Average revenue per unit (€cent per cubic metre) 6.60 6.40-2.90%

The increase over 2009 levels, equal to Euro 5.4 million, is due to the increase in permitted revenues between the 2009 and 2010 transactions, to the extent of Euro 7.7 million, mainly due in turn to the setting up of the second portion of the gradual implementation of recognition of capital costs to a level identified by the tariff system, and to a lesser extent, due to the updates recognising the investments made in 2008 and the registered user dynamics.

However the increase in permitted revenues of Euro +7.7 million is offset by the effect of various adjustments to the accounts from previous years and changes in the accounting of certain tariff components, to the extent of Euro -2.3 million.

In this overall framework, expected revenues for HERA SpA attributable to 2010 only, amount to Euro 152.8 million.

The consolidation perimeter for 2010 also includes MARCHE MULTISERVIZI Spa. Reported below are the consolidated revenues from gas distribution and measurement, distributed volumes and average revenue per unit for the HERA Group.

Gas distribution and metering - regulated revenues20092010% Change
Hera consolidated   
Revenues (millions of €) 155.60163.204.90%
Volumes (millions of cubic metre)2,334.002,504.007.30%
Average revenue per unit (€cent per cubic metre) 6.70 6.50-2.20%

With respect to the regulatory framework set out for HERA SpA, we should note that during 2010, MARCHE MULTISERVIZI obtained definitive approval of the revenue restrictions for 2009 and 2010, on the basis of the stratification of the invested balance sheet capital, and since it passed an additional charge for the preliminary study made on the data presented initiated by AEEG at the beginning of the year. The previous 2009 tariff approval, pursuant to resolution arg/gas 197/09, was made by AEEG in accordance with a penalising method that imposed a reduction of cost levels compared to the levels guaranteed by the pre-existing tariff method. This is why MARCHE MULTISERVIZI shows, compared with 2009, a significant increase in revenues of Euro 2.1 million from Euro 11.9 million to 14.0 million (+18%).

It should be noted that the Net Capital Employed for regulatory purposes, at the baseline revenue indicated for 2010 is approximately Euro 860 million for the HERA Group.