The new regulations on concessions of large water derivations for hydroelectric use

What happened

With specific reference to concessions for hydropower plants with an average nominal power exceeding 3 MW, article 11 quater, Law Decree no. 135/2018 (so-called "Semplifications Decree" converted with amendments into Law no. 12/2019) has modified Legislative Decree no. 79/1999.

The new regulation provides that at the expiration, forfeiture, or voluntary waiver of concessions for hydropower facilities (so-called “wet works”), they shall pass, free of charge, to the respective Region. However, compensation is foreseen, equal to the non-amortized value of the investment, in case the investments made by the concessionaire were foreseen in the concession contract or authorized by the grantor. As for the structures not strictly functional to the operation of the hydropower plant (so-called “dry works”), a price is recognized.

Regions are allowed to assign the concessions as follows: (i) to private economic operators, through the implementation of public tender procedures; (ii) to companies with both public and private capital, after implementing public tender procedures to identify the private partner (so-called “institutional” public-private partnership); (iii) through the institute of the public-private partnership, so-called “contractual”.

The Regions must regulate the procedures for the assignment of concessions by October 31, 2020, which, according to the provisions of the new text of art. 12, Legislative Decree no. 79/1999, must include, inter alia, the methods for conducting the procedures, the criteria for admission and assignment of concessions, the requirements for financial, organizational, and technical capacity, the criteria for evaluating project proposals, and the duration of the new concessions.

Concessionaires are required to pay a biannual fee, the amount of which is determined by the respective regional law, composed of a fixed component and a variable component. The fixed component is calculated based on the average nominal power of the concession, while the variable component is determined as a percentage of normalized revenues, based on the ratio between the plant's production, net of energy supplied to the region, and the zonal price of electric energy. The amounts paid by concessionaires as a fee as determined above are allocated, at a minimum of 60%, to the Provinces on whose territory the individual derivations are located.

Why it matters

The Simplifications Decree has redefined the regulations concerning concessions for large hydroelectric water intakes, making them efficient and consistent with the provisions of the European Union’s legal framework.

The objective of these changes was to make this regulation more efficient, meaning more functional and practical in managing concessions. At the same time, efforts were made to align it with the laws and regulations established at the European Union level.

In other words, the Decree aimed to simplify and improve the management of concessions for large hydroelectric plants, ensuring that these rules are in line with the directives and requirements set at the European level. This is intended to promote greater harmonization and standardization of practices regarding hydroelectric concessions, fostering better integration and cooperation among European Union member. This can result in benefits such as increased transparency, effective utilization of water resources, and sustainable management in line with European standards in the hydroelectric sector.

Now, it remains to be seen how individual regions will implement the above-described national legislation to ultimately assess its effectiveness and impact.