Italian power exchange may be sold off

3 December 2002 – The head of Italy’s soon-to-be-launched power exchange conceded Tuesday that a transfer of ownership into private hands by the Transmission System Operator (TSO) might be the right alternative.

“TSO selling it off might be a good model”, said Alberto Pototschnig, CEO of Gestore Del Mercato Elettrico (GME), speaking at the Converging Gas & Power Markets conference in Amsterdam. Earlier in the day, Italy’s commissioner for power regulation, Prof. Sergio Garribba, had spoken of concerns over the ultimate ownership of the exchange, which under Italian law is responsible for operating the power market.

The TSO established GME in 1999 since when the market has been formulating its rules and operation procedures but has had to put back the start date of trading several times whilst government approval has been sought. The final rules gained ministerial approval in June 2001 but GME still awaits authorization for its revised procedures and instructions, submitted in July 2002. The matter of ownership was one issue being considered, according to Garribba.

Pototschnig was unwilling to be drawn on when the borsa would start but Egbert Lange, head of Sales & Trading for south and Eastern Europe at E.ON, said that it would be at least another three months. Lange said that Italy offered a stable environment for those wishing to operate in the power sector but that their remained some uncertainties such as when the exchange would commence.

The power exchange will be based on a central trading auction system and will operate a day-ahead market with power purchased by the hour as well as adjustment markets.

“The advantages of a power exchange are that generation and supply are separated and price transparency is introduced,” said Pototschnig. “It will make entry into the market for new players easier and introduce more accurate price signals.”

While approval of the market’s procedures is awaited the GMO has been carrying out testing of the system trading as much as 60 per cent of available electricity and says it is now confident that it is ready to go into operation.

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