The Tariff Regulation of Power Distribution and Measurement in Italy

Power distribution and power measurement are the backbone of the energy system. The energy field is fast evolving, and the regulatory authorities have the difficult task of employing tariff methodologies which tackle the problems and challenges arising within it over the course of time. This paper analyses the regulation of power distribution and measurement in Italy as a case study of how regulation evolves as changes emerge. The customary tariff methodology, based on price-cap regulation to operating costs and rate of return on investments, has been coupled with output-based regulation, with the aim of a higher service quality, and input-based incentives to foster specific investments. Output based regulation has been gradually introduced because traditional price-cap regulation resulted in operators striving to attain efficiency and cost reduction at the expense of service quality. Nowadays, decarbonization and energy transition objectives call for the regulatory authority to develop a new tariff paradigm aimed at spurring innovation and introducing incentives based on total expenditures, where revenues are clearly linked to outputs and performance metrics