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Italy regulated natural gas, power returns set to rise from 2019


Country risk premium rises to 1.39%

RBC sees WACC increases for regulated activities

Barcelona — Italy's regulator has proposed changes to the formulas used to calculate returns for gas and electricity services for the 2019 through 2021 regulatory period, including an increase in the country risk premium, which should result in increased rates.

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The country risk premium has increased for the period from 1.0% for 2016-2018 to 1.39% for 2019-2021 following a widening of the spread between Italian and German benchmark debt, according to the document published late Thursday by Italy's power, gas and water regulator, Autorita di Regolazione per Energia Reti e Ambiente (ARERA).

Meanwhile, the level of gearing, which is also used in the formula to calculate regulated returns will also rise from 0.444 to 0.5 for the next regulatory period, ARERA said.

According to calculations by RBC Europe, this means that the new allowed weighted average cost of capital (WACC) are proposed as follows: gas transmission 5.7% (previously 5.2%), gas storage 6.7% (previously 6.2%), gas distribution 6.3% (previously 5.9%) and electricity transmission 5.6% (previously 5.1%).

The consultation period will run until November 28, ARERA said.

--Gianluca Baratti,

--Edited by James Leech,