2012 Incentive schemes

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The AEEG has introduced a specific bonus and penalty scheme aimed at incentivizing service improvement, in both technical and economic terms. Implicit in the incentive mechanisms is the assumption that if the objectives are achieved, the benefit for the users of the service will be a multiple of the incentive paid to Terna. In particular, in 2012 incentive mechanisms were provided for:

  • the quality of transmission service. The AEEG has defined (Resolution 197/11) a framework of incentives and penalties, applicable for the three-year period 2012-2015, linked to the ENSR (relevant energy not provided) indicators evaluated by referring to three different sub-indicators: ENSR-TERNA, ENSR-TELAT and ENSR-ALTRI, referred to three distinct portions of the national transmission grid. Temporarily, for the 2012-2015 period, economic effects are only associated with the first two sub-indicators and the bonus/penalty is calculated by multiplying a pre-established sum by the difference between the actual value and the target value of the indicator, net of an exempted range (+/-5% of the target value of the indicator). The inclusion of the grid portion acquired in 2009 from Enel (Telat grid) within the incentive mechanism includes the application of diversified targets, converging in 2015. At present, the final calculation by AEEG of the indicator for 2012 by which the incentive is valued is not yet available;
  • reduction of the volume of resources procured on the Dispatching Services Market (DSM). The mechanism was introduced in 2007 for a four-year period. It was modified by Resolution ARG/elt 213/09 and extended through 2012. The current mechanism provides for a differentiated unitary cap for each year and does not provide for a bonus cap;
  • acceleration of investment to develop the NTG. This mechanism, originally introduced by Resolution ARG/elt 87/10 and modified by Resolutions ARG/elt 199/11 and 40/2013/R/eel provides for a 2% additional incentive for the work in progress on development projects with the most added value for the electric system (elimination of congestion between market areas, increased transport capacity with other countries), conditional on the achievement of a series of milestones agreed on with the AEEG. Starting in 2012 a penalty mechanism is also applied in the event that development works go into operation behind schedule. Furthermore, Resolution ARG/elt 199/11 provides that Terna's participation in the investment acceleration mechanism (optional without other consequences until 2011) is a necessary condition for access to the additional 2% remuneration for Category I3 investments.

The bonuses earned in 2012 for achieving the objectives established as part of the incentive schemes are included in Terna's total regulated revenue. In the case of the incentive for reducing the volume of resources procured on the MDS, compared to the result achieved in 2012 and in consideration of the three-year period of the incentive mechanism and its characteristics, Terna recorded 23 million euro in its 2012 Financial Statements (165 million total during the 2010-2012 three-year period, as adjustment of the related fair value, taking into account the risks connected to the determination of 2012 targets and performance as well as the possible corrections to the volumes booked for 2012.

INCENTIVE MECHANISMS ACTIVATED IN 2012
Objective Resolution AEEG Period applicable 2012 result
Quality of transmission service Resolution 197/11 2012-2015 Being defined by AEEG
Reduced volume of resources procured on the MDS Resolution 213/09 2010-2012 Bonus € 1 million
Acceleration of investment to develop the NTG Resolution 199/11 2012-2015 Bonus € 14 million