Analysts Comment on Energy and the Italian Referendum

A victory for the “yes” side at the Italian referendum on constitutional reform of December 4 will return to the state the power to legislate on energy matters, but might not in itself mean the authorisation process for energy projects will be smoother in the future, energy and constitution experts have told NGW.

Should the reform go ahead, that would “bring clarity from a legislative standpoint on who's competent (for regulating) on matters of national interest”, according to Alberto Clo', professor of applied economics, and scientific coordinator of Italian energy research company RIE.

With this new reform, which would change as many as 48 articles out of 139, “energy infrastructure and transportation networks return to state competence” among other things, he told NGW at the end of November. “That's a necessary precondition, as it reinforces the state's power and reduces the veto power that had been acknowledged to local authorities” through a previous reform of Chapter 5 of the constitution – the one related to energy matters – in 2001.

That reform had “complicated things,” Clo' said, as local communities “were rarely perceiving that investments and projects realised on their territory were indeed of national interest,” he added. Nevertheless, a victory for the prime minister Matteo Renzi and the consequent reform of Chapter 5 would “not be enough” to simplify things, objected Clo'.

The 2001 reform of Chapter 5 “was an easy alibi for the state,” he said. Pointing at the fact the situation was anything but smooth before the 2001 reform, in terms of authorising projects that were impacting on local communities, he said: “Any reform is dependent on attitudes” at a national level and it remains to be seen whether the central government will be willing to adopt a stronger stance on matters of national interest, such as energy infrastructure projects.

On the other hand, the reform raises issues from a strictly procedural standpoint, argued Francesco Pallante, lecturer in constitutional law at Turin university and campaigner for the “no” side. “No one among the 'no' [campaigners] says the constitution as it is, is untouchable,” he said, adding proposals for modifying the current text had been put forward by academics, among others. “Rather, we challenge this reform because it risks making things even more complicated.”

From a law standpoint, he said, “it is a poorly written text, full of contradictions” and moreover, “Constitutional reform proposals should not come from a single political side.”

In addition, “there are power the state is going to acquire” with the reform, “that it didn't have before,” thus threatening “the balance between powers” within a democracy.

On energy matters, Italy has historically faced strong local opposition to projects of various kind, mostly on environmental grounds, leading sometimes to a scrapping of the plans altogether. One example among many is BG's LNG terminal project in Brindisi, southern Italy, which was shelved by the company in 2012 after an 11-year wait to get all approvals from Italian authorities.

For some, this “not in my backyard" syndrome, teamed with a legislation that gives veto power to local authorities, has led to a paralysis in the planning and building of energy infrastructure in the country. According to that view, reducing such power would be a welcome change that might smooth up the process.

However, changing rules doesn't in itself mean attitudes would change, Pallante said. He pointed to the fact that "the state already has powers that it doesn't make use of” in order to avoid “clashes with local power, which are often strong.”

“We believe [in Italy] that changing the rules would mean changing the general political attitude. I fear that's an illusion,” he said. 

In a letter to UK-based Italian voters, the “Yes” campaign said that besides reforming Chapter 5 in order to “avoid conflicts of attribution” of power in the future, the reform – proposed by Renzi and minister for reform Maria Elena Boschi – would “maintain the fundamental principles of the constitution” and would “not increase” the prime minister's powers. It would rather “innovate and simplify” by reducing the number of senators from 315 to 100 and “overcome equal bicameralism” by giving the lower house more powers, among other things. The senate on the other hand would be turned into a “Senate of regions”, representing local governments.

Looking specifically at energy matters, however, the reform would raise particular concerns by introducing “a clause of supremacy” for the state, Pallante said.

Under that clause, although the regional administrations would maintain some authority to legislate on other matters, such as health and environment, which might be affected by the construction, for example, of an energy project, should a conflict arise with the state, and should the state declare that the project is of “national interest," then it would take over such powers from the region through a specific law of parliament, he explained.

Impact on energy companies uncertain

So far, despite it might appear energy projects would benefit from the reform going ahead, energy companies have been cautious in linking any referendum outcome to a direct impact on their business.

One major project, the TransAdriatic Pipeline, which is set to land in Puglia, southern Italy, is not understood to be impacted by the outcome of the referendum, having obtained the single authorisation permit from the ministry of the economy May 20 2015 and with construction having started in May 2016.

TAP: The last leg of the Southern Gas Corridor

(Credit: TAP)

TAP had struggled in recent years to overcome local opposition. Despite that, construction is progressing, TAP confirmed to NGW, declining to comment specifically on the Italian referendum.

TAP's senior media advisor Luigi Quaranta said that “the TAP project is on schedule” as “TAP continues to progress its construction activities across the three host countries, according to plan.” On November 8, he said, TAP secured the complete permit approval (so-called A44) which allows it to proceed with moving the 231 olive trees. The issue of the uprooting of the olive trees had been the most recent point of contrast between TAP and local Puglia authorities, Italian media had reported.

Meanwhile, Italian gas grid operator Snam's CEO, Marco Alvera', had told financial newspaper Il Sole 24 Ore at the end of September that looking at the company's planned investments of €4.3bn through 2020, “if there's something that put at risk part of our efforts, that's difficulties” at the local level. “Therefore, anything that might help to slim down and speed up authorization processes is welcome.”

Snam is among the companies behind TAP, with the pipeline being instrumental in its plan of turning Italy into a south European gas hub. However, Snam declined to comment to NGW specifically on the referendum.

However, in the same interview to Il Sole 24 Ore, Alvera' had toned down the risks linked to the vote, saying that overall, the company was not concerned for its investments, adding that there was “excessive concern” at international level surrounding issues such as the referendum and the banking sector crisis in Italy. Later in October, he had told Il Sole 24 Ore that Snam's business “is not in the short-term linked to the macroeconomic situation.”

Francesco Starace, CEO of Enel, was equally cautious. He told analysts at Enel's Capital Markets day in London November 22 that the company didn't see “any major policy-related issue at stake” coming from the constitutional referendum.

“Most of the regulatory framework changes have taken place already,” he pointed out, citing in particular a recent reform of electricity distribution tariffs, ahead of the full transition from regulated tariffs to to free market ones for domestic users from June 2018.

“There are always some open points” such as what will happen after June 2018, he accepted, “but nothing fundamental, we don't expect an earthquake on the regulatory framework” he said.

Dominant energy producer and importer Eni also declined to comment on the referendum.

Beatrice Bedeschi