Italy’s slow progression towards a deregulated electricity market took another step forward Tuesday when the Italian government passed legislation to allow municipalities to sell off the right to manage a city utility network.

City governments in Italy control most local utilities and are barred from selling more than 50 per cent of the share capital.

“Municipalities can now spin off network management, but they still have to maintain ownership,” said Pietro Armani, Chairman of Parliamentary Environment Committee, according to a report by Dow Jones Newswires.

The law, passed by the government, must be approved by the Parliament in order to be enacted.

According to the revised text of 2002 budget law faxed by Armani’s office, “municipalities can sell their controlling stakes in the companies providing (utility) services.”

The sale does not affect the validity of existent contracts, which will be automatically transferred to the new manager of the network, the law says.

Although Italy has been one of the most vocal critics of other EU country’s (most notably France) failure to deregulate their industry, Italy itself is still in the early stages and government’s role is still large. The recent sell-off of Enel’s generating subsidiary Elettrogen lacked transparency and the government’s stake in Enel leaves it with influence over the transmission grid and dominating regulatory activities.