In the discussions on the economic policy of the future government, the big questions occupy the scene, as it should be: public deficit, taxes, fight against poverty and unemployment, pensions. Sooner or later, the issue of utility regulation and we will see what this new season has in store for us. But a reversal, or at least a course correction, with respect to the policy pursued, albeit with numerous hesitations and some yielding, by the governments of the last twenty years appears probable.
Indeed, the economic culture of the parties that emerged victorious from the elections seems favoring public ownership as a means of market control rather than independent regulation based on institutions not immediately inserted into the political circuit.
In the energy sector there are at least two appointments on which the policy guidelines of the new Minister of Economic Development and the new Energy Authority will be measured (for the one currently in office, an extension of up to 90 days has just arrived). Firstly, in July 2019 it should see the end the protected electricity tariff, which affects as many as 20 million small consumers. At least this is what is required by the competition law approved last August, after a long and troubled discussion, with a solution that evidently left the 5 Star Movement unhappy. But the procedures for the transition are largely yet to be written and it will be up to the new Minister to do so (after consulting the Authority), unless the matter is brought back to Parliament.
And then, albeit without binding regulatory deadlines, there is the painful affair of gas distribution concessions, where from 2011 tenders for the award should be organised. Seven years spent trying to overcome, without success, the fierce opposition of the municipalities and the ANCI which risk seeing the many companies controlled by them lose in the tenders; thus of tenders if only 3 are made (but only one awarded) out of the 172 envisaged (a true dream of regulatory omnipotence that of the legislator of 2011). A delay that had unfavorable effects on investment decisions and therefore on consumer welfare.
The Italian discussion will take place in an international context that is not entirely reassuring for the standard-bearers of independent regulation. Right from Great Britain, the model country to which in the last twenty years, in Italy and in Europe, we have repeatedly inspired, a wind is blowing that brings arguments in favor of our proponents of a paradigm shift. There the utility companies are in the political crosshairs. As well recounted in a recent paper by Oxera, there is a climate of declining confidence that regulation can offer good quality services at fair prices and concerns that companies are overly profitable are rife in media reports and political judgments. In short, utilities (water, energy, railways) and their regulators have an image problem.
For Labor Party the solution to this problem is renationalisation, and in February 2018 the party held a conference on alternative models of ownership, sending a clear message to stakeholders: bringing utilities public remains high on the party's priority list. Polls suggest this is a popular policy: A YouGov survey dating back to the run-up to the last election found that a majority of respondents believe that energy companies (53% of respondents), rail and water companies ( approximately 60%) and Royal Mail (65%) must be owned and operated by the public sector.
In contrast to the Labor Party, the position of the Conservative government is that trust can be restored through increased effectiveness and pervasiveness of regulation. In January, Secretary of State for the Environment Michael Gove wrote to Jonson Cox, chairman of Ofwat, the water sector regulator, outlining some corporate behavior that would require closer scrutiny – financial arrangements off- shore, securitization, high leverage, high executive pay levels and high dividends. Renationalisation is something the current government certainly does not support but, as Gove pointed out, "If we don't see change, the pressure to renationalise will only grow." And in the electricity sector, confirming this mood in favor of a more intrusive policy, the government recently presented a bill to introduce a ceiling on tariff increases.
It is announced a difficult season for the "regulatory state". A good reason to start a reflection on the limits but also the virtues of this model, beyond the political situation and the spirit of the time.
