Italy's Snam Rete Gas - Implementing Industry Restructuring in a Changing Regulatory Environment
Snam Rete Gas (SRG) is the major gas transmission pipeline company in Italy. As the programme of market deregulation sweeps across Europe, SRG will continue to be a key player in the Italian market.
In order to prosper in this changed environment, SRG needed to meet a number of strategic challenges. In response to statutory direction, SRG was required to design and publish access conditions and tariffs to allow third parties to transport gas through its pipelines, thereby facilitating competition in gas supply.
To assist them, SRG chose Capgemini as business advisers. The successful partnership has allowed SRG to design and develop tariffs and access conditions, supported by the necessary systems and processes. SRG successfully implemented all of these within agreed targets.
Snam Rete Gas, established by Snam as a new company to respond to market liberalisation sweeping across Europe, transports approximately 90% of the total gas volumes flowing into Italy.
The company provides gas transportation services through its high-pressure gas transmission system to parties wishing to supply gas to end-customers.
SRG manages a network comprising over 30,000 km of pipeline and transported 70 billion cubic metres of gas in a recent year. SRG’s primary objective is to manage the gas flows on its network in an efficient and secure manner.
As a monopoly gas supplier and transporter, Snam formerly performed the activities now undertaken by SRG. Snam is a subsidiary of ENI, the Italian energy multinational.
Business Requirements
SRG faced a number of strategic challenges arising from market liberalisation, with increased competition in gas supply being a major driver. The challenge was for SRG to become more customer-focused and innovative, demanding development of new support systems and processes.
Corporate attention, formerly by Snam and latterly by SRG, focussed on the rapidly changing regulatory landscape in Europe, especially in Italy. Following the original EU directive on energy market liberalisation, the Italian Ministry of Industry published its own decree.
The decree established the framework for the introduction of competitive gas supply in Italy, specifying liberalisation objectives and the roles of various regulatory bodies. The decree also specified the requirement for transporters to publish new commercial rules (access conditions or “Network Code”) and charges for third parties wishing to access their pipelines. The challenge for market players was to develop strategies and solutions that complied with this framework.
In addition, guiding principles dictated a clear separation of transportation and supply activities of gas companies where these activities were formerly integrated. Strict regulation would cover matters like network access and associated tariffs, and new and incumbent players would compete on a level playing field via non-discriminatory terms.
The proposals pointed to a radical restructuring of the Italian gas industry, and required SRG to develop a completely reshaped organisation. SRG management recognised that the organisation needed the services of an experienced adviser to help SRG address the wide-ranging business issues that it faced.
SRG invited Capgemini as partner. The insight and experience that Capgemini possessed from working with various market participants and regulators around the world were important factors in SRG’s decision. This was vital to help SRG navigate its way through a complex regulatory maze. Similarly, Capgemini brought with it the ability to tailor solutions to the Italian market and an approach which delivered from strategy to implementation.
The Capgemini Solution
One of the key tenets of Capgemini’s proposition on market restructuring of the Utility sector is that the solution should be tailored to meet the requirements of different markets and geographies. Therefore, the precise form of support that is appropriate to individual clients varies on a case by case basis.
During the period of almost two years since the partnership was established, Capgemini assisted SRG in the following areas:
Transportation Tariff Model
Strategic advice to help SRG develop a model to support transportation tariffs,
based on an ‘entry/exit model’. Strategic advice was also provided on the structuring
of SRG’s services and its positioning in relation to the regulator.
Access Conditions (“Network Code”)
Assistance with the development of detailed commercial and operational arrangements
to form the initial Network Code for the first year of operation. These arrangements
specify the rules to govern the access of shippers to the SRG network.
Network Code Programme
This covered the overall co-ordination of SRG’s Network Code Programme. Elements
included the development, and ongoing monitoring, of plans to manage the entire
programme. Areas like issue and risk management were critical success factors.
Business Process Model
Development of a business process model to support the new SRG organisation.
The model was used as a high level tool to facilitate the design of the next level
of detailed processes.
Implementation Support
Assistance to develop a plan to implement the new processes and systems on the
statutory date set by the regulator. This support also included the development
of a framework to allow SRG to monitor and report on the success of the new arrangements
in the post-go live environment.
The Benefits
SRG can testify to many benefits from Capgemini’s involvement in this critical industry programme.
Capgemini’s understanding of, and deep insight into, deregulating energy markets has allowed SRG to develop a coherent position in discussions with the regulator on key business issues, with recommendations on how these issues should be addressed.
SRG completed and published the new Access Conditions on schedule, allowing them to come into operation as planned and in compliance with the regulatory timetable.
The project team, comprising individuals from Capgemini and SRG, worked as a single cohesive team. This facilitated an effective transfer of knowledge in a number of key business areas. This essential benefit allows SRG to compete in a liberalised market with experience and authority.
Following successful implementation of the Access Conditions, Capgemini continues to support SRG in ongoing discussion with the Italian regulator. This includes advice on how the new deregulated regime may evolve over time, and how SRG can develop effective strategies to respond to these developments.
Written in co-operation with Snam Rete Gas
