ARERA, the Italian energy regulator, recently announced substantial enhancements to its 2022 gas supply contract monitoring regime, updating and restructuring the existing reporting rules first established in the wake of Russia's invasion of Ukraine.
Background: The 2022 Reporting Regime
The original reporting requirements were established by Decree-Law 21/22 (decreto-legge 21/22) and largely implemented by ARERA Deliberation 143/2022/R/gas of 30 March 2022. Under that framework, firms were required to submit the full text of any existing and new long-term gas supply contracts (those exceeding one year in duration) to the regulator, including when such contracts were amended or modified. For short-term contracts (those of less than one year), the reporting obligation was more limited, covering only price and volume information rather than the full contract text.
In its latest announcement, ARERA stated that it had identified data quality issues with the existing programme. These include frequent misalignment between the volumes allocated by the transmission system operator (TSO) to users at grid entry points and the contracted volumes reported by those same users under the current regime, as well as the occurrence of price and volume adjustments several months after the fact. ARERA determined that this was an appropriate moment to formalise and strengthen the 2022 regime and is extending its scope to capture a more complete view of gas supply, including over short-term LNG contracts.
Three New Reporting Flows
The new rules define three separate reporting obligations.
The first is the document flow, under which the full text of new or amended long-term contracts, related addendums, and short-term LNG contracts (which were previously out-of-scope) must be submitted to ARERA, accompanied by an Excel-based summary.
The second is the historical flow, comprising a monthly Excel-based report on quantities and costs of gas supplied under both long and short-term contracts. This category is likely to represent the most significant operational change for firms in scope. Data must be split between long and short-term contracts, and all long-term contracts must be included even where volumes for the relevant period are temporarily zero at a specific entry point. Short-term contracts (both pipeline and LNG) must be reported in aggregate form for each grid entry point and for each contractual delivery point, with weighted average costs reported relative to those volumes.
The third is the prospective flow, which provides ARERA with the ability to request, on an ad hoc basis, forecasts and forward-looking supply estimations from a defined subset of market participants. This obligation applies only to the larger entities who collectively inject 80% of the total gas into the Italian national network, as measured over an unspecified reference period. The reporting format for this third category will be determined by the Director of the Energy Markets Directorate (Direttore della Direzione Mercati Energia) when such data is requested.
The Deliberation is accompanied by technical specifications set out in Appendix A and Appendix B, each with associated Excel-based reporting forms.
Expanded LNG Reporting Requirements
LNG reporting obligations have been broadened materially under the new rules. All LNG supply contracts, including short-term contracts, must now be reported under the document flow, with full copies of short-term LNG contracts now required for the first time. Under the historical flow, firms must report both long and short-term LNG volumes at the delivery point and at the grid entry point. Volumes must be reported in the month they are actually allocated into the Italian grid and must remain linked to the original cargo pricing even where the allocation occurs in a later month.
RegTrail Observations
ARERA is likely to regard the additional compliance burden imposed by this initiative as justified, given both the haste with which the original 2022 regime was conceived and implemented, and the continued security of supply concerns arising from the ongoing events in the Middle East. The announcement also suggests that ARERA seeks greater visibility over actual gas procurement costs and does not consider REMIT reporting a sufficiently reliable mechanism for this purpose or is unwilling to wait for the revised reporting framework to be implemented under the recently adopted REMIT Implementing Regulations.
The timing of the announcement is notable however. It comes only days after the EU Commission reaffirmed its commitment to reducing regulatory burdens on firms and called for the cessation of national gold-plating of EU rules.
ARERA's Deliberation also states, as a further rationale, that "the collection of the aforementioned information is also intended to verify the quality of the data transmitted to ACER pursuant to Article 8 of REMIT." The proposition that a parallel reporting regime based on Excel submissions and email delivery is an appropriate mechanism for verifying the accuracy of the more mature and technically sophisticated REMIT reporting framework is likely to be poorly received by market participants, particularly given the significant ongoing work to upgrade that framework under REMIT II. The prospective flow obligation, granting ARERA the discretionary ability to request forecasting data from some firms, adds a further layer of uncertainty for those falling within its scope.
