September 08, 2014

Italy's new energy policy is bad news for rail

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A decree issued by the Italian government on competition in the energy sector, which became law on August 21, is causing widespread discontent among the country's rail operators.

The issue concerns the special tariff regime on energy consumption, which was agreed in 1963 by Italian State Railways (FS) and Enel, Italy's largest energy supplier. Under this deal FS handed over its power plants to Enel in return for a permanent discount on its energy rates.

Following the privatisation of Enel in 2000, infrastructure manager Italian Railway Network (RFI) has been charged at the market rate for traction energy, with Enel paying an annual rebate to RFI to cover the value of the discount. RFI passes this discount on to all train operators using the national network, with larger operators receiving a greater share.

The energy tariff was calculated on two consumption levels, with a base rate covering usage up to 3300 GWh and a so-called excess rate for anything above this. In 2013 RFI consumed a total of 4875 GWh.

Under the new regime, existing charging arrangements only apply to freight and so-called universal passenger operations, which encompasses long-distance, overnight, and regional service operated under public service contracts. This means commercial passenger operations, specifically Trenitalia's Frecce high-speed services and NTV's Italo operations will bear the brunt of an €80m cut in the energy rebate paid to train operators via RFI.

This cut will be implemented incrementally by 2018, but it is still a serious blow to rail operators getting back onto their feet after a long economic downturn, particularly NTV, which is under pressure to reduce its debts.

Energy prices have already been raised this year, after Italy's National Energy Authority (AEE) decreed that RFI is no longer a high-demand energy consumer. This act alone has added €25m a year to RFI's electricity bill.

On the plus side, track access charges for high-speed lines were reduced last September to €12.81 per train-km. Traction costs are charged at a rate of €0.357 per train-km for all operators.

Additional charges for Trenitalia high-speed services in 2015 are therefore likely to run into tens of millions of euros, with NTV also will face a significant hike. It looks likely that these additional costs will translate into higher fares.

As all this demonstrates, Italy is a contradictory country. National transport policies seek to stimulate modal shift for both freight and passengers. New entrants to the railfreight market are helping to make the sector more competitive with road, while the high-speed market has enjoyed the benefits of competition through liberalisation and the arrival of NTV, which has pushed up service standards across the board.

Railfreight operators have successfully lobbied the government to ensure the new law does not affect their business, but high-speed passenger operators are still urging a rethink. NTV has publicly criticised the measures, which appear to be aimed at providing small and medium-sized companies with lower energy costs at the expense of larger consumers.

In a world where only large companies survive in a very aggressive market, the idea of helping very small companies has all the hallmarks of a policy which favours local lobbies over a long-term and open-minded vision.

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