Economics of the 96/92 Directive with Reference to Italian Electricity Market Liberalisation Process

This paper contains an economic review of the law regulating the liberalisation process now under way in the Italian electricity sector. Part one is a juridical insight focusing first on Community rules, in particular Directive 96/92, which provides for common rules for the internal electricity market, and then on the recent Italian implementation decree No. 79 of 1999. The review takes into account the separation of the electricity sector - adopted by the Community legislator as well as by the Italian legislator - into three major components: generation, transmission, and distribution, supported by a fourth one, supply. In part two, the issue of liberalisation of the electricity sector is tackled in economic terms, with special focus on transition from the public monopoly that has characterised the Italian experience for some time. Based on the separation of the sector into different components, the features of each are analysed in terms of competitiveness. In particular, the future market configuration is considered for generation, where the national electricity industry will prevail, at least in the next future; for transmission, the economic implications of regulations, implemented through the "system operator", are reviewed; for distribution, the decision to break up the market by means of a system of local monopolies is analysed; finally, for supply, the distinction between "wholesale customers" and "final customers" is described in the light of their respective operational capabilities in a market regulated by a "market operator".