Operating review

Energy Management

As from 1 January 2014 the merger of Acea Energia Holding with Acea Energia came into effect; the latter also performs “Energy Management” activities, as these are necessary for Group operations, sale and production in particular.

The Company also liaises with the Energy Market Operator and with TERNA. In relation to the institutional entity Terna, the Company is the input Dispatch User on behalf of Acea Produzione and other companies in the ACEA Group. It performed the following main activities in the period:

  • the optimization and assignment of electricity produced by the Tor di Valle and Montemartini thermoelectric plants and by the S. Angelo hydroelectric plant,
  • the negotiation of fuel procurement contracts for the power generating plants,
  • the procurement of natural gas and electricity for the sales company to sell to end customers,
  • the sale of environmental certificates (green certificates, issue rights and renewable source production certificates) for Acea Energia and Acea Produzione,
  • the optimisation of the supply portfolio for the procurement of electricity and management of the Energy segment companies’ risk profile.

In 2014, Acea Energia purchased a total 9,960 Gwh of electricity from the market, of which 7,853 Gwh through bilateral agreements and 2,107 Gwh through the Energy Exchange, essentially for resale to free market end users and partly set aside for the optimization of energy flows and purchases portfolio.

 

Electricity production

The Acea Produzione production system comprises a series of power generating plants with a total installed capacity of 344.8 MW, including five hydroelectric plants (three in Lazio, one in Umbria and one in Abruzzi), two so-called “mini-hydro” plants in Cecchina and Madonna del Rosario, two thermoelectric plants, Montemartini and Tor di Valle (the latter fitted with a combined cycle module for steam turbine extraction and an open-cycle turbogas module providing cogeneration for the district heating in the Torrino Sud, Mostacciano and Torrino-Mezzocammino districts of Rome).

Through its directly owned plants, in 2014 the company achieved a production volume of 498.1 GWh of which (i) 485.8 GWh from hydroelectric plants, (ii) 2.1 GWh from mini-hydro plants and (iii) 10.2 GWh from thermoelectric production.

In the district heating segment, through the Tor di Valle plant’s cogeneration unit, Acea Produzione supplied 2,659 end users located in the Torrino Sud, and Mostacciano districts (located in the southern part of Rome) with 73.1 GWh of power.

The hydroelectric segment recorded production of 487.9 GWh, benefiting from the contribution of the run-of-river Salisano drinking-water plant, slightly above the ten-year historic average (+1.9%). Production at the Castel Madama, Mandela and Orte run-of-river plants was significantly higher (+ 27.9%) than the ten-year average due to an increase in the level of water input for plants on the Tiber basin (Aniene and Nera rivers), also due to the putting back to 2015 of the project to improve abstraction tunnels at Castel Madama.

An increase in production was recorded compared to the ten-year average by the S. Angelo plant (+22.1%), with 186.1 GWh. The average water inputs of the Aventino river (6.2 m3/s) and Sangro river (11.8 m3/s), were respectively +28% e +14% compared to the average in the three previous years 2011/2013. Although the autumn weather was quite dry, particularly in November and December, the high rainfall in the winter and spring seasons ensured positive water input values from the rivers, with an average power output of 21.3 MW.

The company's thermoelectric production stood at 10.2 GWh at 31 December 2014.

The negative production trend for the combined cycle of the Tor di Valle plant, for which planning and engineering to modernise the plant has begun, is confirmed. In addition, particularly low market prices have also affected cogeneration, which recorded a further drop in output compared to the past. The combined cycle, kept running as a cold reserve, played a dual role in 2014, that of feeding unit in accordance with the Emergency Plan for the city of Rome, and back-up for the cogeneration unit by means of the steam extraction system connected to the district heating network. With regard to the cogeneration section, the constraint imposed in terms of emissions of NOx in the TG3 unit made it necessary to use ancillary boilers for the generation of heat for district heating. The above is in any case in line with the company's plans to modernise the power plant, for which the Lazio Region has issued a favourable environmental compatibility opinion.

2014 was the seventh year of operation of the Montemartini plant as a generating unit essential to the security of the National Electricity System, pursuant to AEEGSI Resolution No. 111/06, as part of the National Electricity System Security Plan – Emergency Plan for the City of Rome.

Electricity and gas sales

As for the sales market, the refocusing of Acea Energia's sales strategy continued in the period with a more in-depth and careful selection of customers, and a plan divided into two parts. The first tends to favour contracting small customers (residential and microbusiness) while the second consists of maintaining the current joint ventures when deep-rooted in the territory if they can guarantee adequate profitability.

Investment management continued in the period for Umbria Energy and Elga Sud operating respectively in Umbria and Puglia, in line with the above. The Tax Authorities (BAT Provincial Office) started an assessment on 15 October into Elga Sud for the 2010 tax period, and ending on 12 November 2014 with the notification of an official report. Contested findings related to the non-deductibility for Ires and Irap ends of some costs. A total of 27,000 euros in additional taxes have been requested. The company applied to settle the tax assessment, and in February 2015 paid the sums requested by the tax agency.

The liquidation of Voghera Energia Vendite, the joint venture between ASM Voghera and Acea Energia, is still underway. This year the Customs Office proceeded:

  • with the nullification by internal review for 2009, 2010, 2011 and 2012, of the notice of payment and application of penalties amounting to approximately 10 million euros plus the penalties notified in February 2014 (for a total of 25 million euros);
  • for 2008 the company paid 124,000 euros in taxes, penalties and interest;
  • on 28 October, served an official report for the year 2010, with the sole contestation of the non-payment of duties and additional taxes on billing to a single customer, amounting to 28,000 euros, plus penalties totalling 19,000 euros. The company will ask the customer to pay back the greater sums ascertained by the agency, not having been paid by the customer.

With reference to the tariffs applied to the protected categories service:

  • In terms of distribution tariffs, compulsory distribution tariffs, updated quarterly in accordance with Annex A of the Authority's Transport Code, have been applied to end users on the protected categories market and are valid for the whole of 2014.
  • With regard to connection fees and flat rate charges the parameters used were those defined by the Authority in Resolution no. 348/2007, Annex B (Connection Code) and are valid for the whole of 2014.

In 2014 the sale of electricity in the Protected Categories market was equal to 3,000 GWh, 7.2% down on the previous year. The number of withdrawal points totalled 1,023,316 (1,071,557 at 31 December 2013): this reduction derives from fierce competition in the Rome market from its main competitors, which the company responds to through the constant marketing of its services to maintain its customer portfolio.

Sale of electricity on the Free Market amounted to 7,344 GWh for Acea Energia and 543 GWh for the retail Joint Venture, for a total 7,887 GWh, a decrease of 15.9% vis-à-vis 31 December 2013.

In addition, Acea Energia sold 103.5 million euros of standard cubic metres of gas to final customers and wholesalers. The number of delivery points totalled 154,601 (98,676 at 31 December 2013).

Finally, it is reported that, in accordance with AEEGSI Resolution 637/2013/R/EEL, the Company was awarded a sum of 5.4 million euros within the framework of the compensation mechanism for arrearage in cases of fraudulent withdrawals, following the action filed in June 2014. This sum was paid on 31 December 2014.

Concerning the penalty proceedings that were implemented on 8 November 2012 against Acea Energia with Resolution No. 462/2012/S/eel, as a result of the dispute in 2013 with the Company, AEEGSI Resolution No. 540/2013/S/eel on 28 November 2013 declared the commitment proposal presented on 25 October 2013 to be admissible, and approved the same for publication. On 19 February 2014, AEEGSI published the remarks, presented after the deadline, by Federconsumatori the Italian consumers and users federation, to which Acea Energia replied in March 2014, confirming its position specified in published commitments.

With Resolution No. 174/2014/S/eel of 17 April 2014, AEEGSI approved the commitments proposed by ACEA Energia, making them obligatory, closing the proceedings opened against the same in Resolution No. 462/2012/S/eel. Briefly,

  • the commitment concerning the elimination of the so-called “billing code”, in other words for customers not subject to additional safeguards, waiving the right to bill consumption estimated by the retailer with reference to the period from the date of metering (effective metering by the distributor or a more recent figure somewhere between the distributor's estimate and the customer's automatic reading) and the date of issue of the bill to the end user, must be implemented starting from the first 2-monthly billing cycle following the date on which AEEGSI notifies Acea Energia of said commitments;
  • the commitment concerning payment of indemnity for customers in the protected category market affected by billing blocked at 31 December 2012, formulated on the basis of the duration of the disservice, must be implemented no later than after the second 2-monthly billing cycle following the date on which AEEGSI notifies Acea Energia of said commitments;
  • Acea Energia must provide adequate notification of its commitments to end users;
  • Acea Energia must send the Authority, within 240 days of the notification of commitments, documented proof of the full implementation of the same as well as notification of the costs borne for implementing said commitments, providing reference thereof in the notes to the separate annual accounts (accounting unbundling);
  • if Acea Energia fails to meet its commitments, AEEGSI can recommence penalty proceedings and apply a penalty of up to double the amount which would have been applied in the absence of commitments.

It is noted that in compliance with the provisions of said resolution, on 24 December 2014 the Company notified the Authority of the full performance of its commitments, and provided the relative documentary evidence.

After the close of the year Acea Energia:

  • appealed to TAR Lombardy to obtain the repeal of AEEGSI Resolution 670/2014, since the tariff component intended to remunerate service marketing costs is absolutely unsuitable for adequately covering said costs;
  • was notified, on 25 February 2015, of the start of preliminary investigations (ref. PS/9815) on the part of the Antitrust Authority (hereafter AGCM) in accordance with art. 27, paragraph 3 of legislative decree 206 of 2005 (hereafter “Consumer Code”) and art. 6 of the Regulation on investigation procedures for misleading and comparative advertising, unfair trade practices, violations of consumers’ rights in contracts and unfair contract terms (hereafter “Regulation”) adopted by the Authority in its resolution of 5 June 2014. The proceeding was opened as a result of a number of reports received by AGCM from single customers and from the consumers’ Association Adiconsum Toscana. The proceeding in question, in accordance with art. 7 of the Regulation, will conclude within 150 days of the date of 25 February 2015. Acea Energia has made a request to have access to the proceeding’s documents, with special reference to the investigation file;
  • was notified, on 19 March 2015, of the commencement by AEEGSI of a proceeding for disciplinary actions due to the non- or delayed disbursement of automatic indemnities (resolution no. 111/2015/S/eel). The investigation will last a total of 180 days as from the date on which the measure was notified.

   

Cogeneration

In 2014 too operating management focused on two key areas: the technical and economic monitoring of operating plants and new projects under construction.

Ecogena proceeded with the construction of a new trigeneration plant for the EUR "Europarco" complex; energy services were first provided for the new “Cinecittà World” theme park in Castel Romano in July 2014. The service will be provided at a reduced rate until the middle of next year when the plant should go into full production. The energy supply service has been contracted for a period of 15 years. During the second half of the year full production resumed at the cogeneration plant serving the Sigma Tau plant in Pomezia. Work had been suspended to carry out technical and mandatory checks, which were successfully completed. Building work continued in the areas dedicated to the construction of the new "Laurentino” shopping centre, in the Laurentina/Tor Pagnotta district of Rome. In view of the delays to building works, the energy service will not be operational before June 2017. A marketing campaign is continuing with ACEA Energia customers, chiefly from the business segment, to promote the company’s energy-saving services.

Finally, it is noted that subsidiary company EurPower was wound up in November 2014.