Success and growth? They also go through regulation

D. Lawyer Marta Moreno, let's start from current events and the amendment to the Milleproroghe decree which postponed the termination of the greater protection regime in the natural gas and electricity sectors to 1 July 2020 (it should have been in 2019). In this regard, the undersecretary for Economic Development with responsibilities for Energy, Davide Crippa, justified the decision with the need to have "a little more time to avoid initiating a non-democratic change that does not take into account the different needs of the interested parties". What do you think?

The debate has rightly focused on the risks of market concentration in the hands of large players. In particular, it is requested that the Ministry and ARERA - the regulatory authority - act to ensure that customers in the protected segment are not made to migrate to companies already dominant in the Italian energy market. The measure - as the undersecretary explained - has become indispensable, because the necessary guarantees of information for consumers on the market, competitiveness and transparency do not exist.

The government is committed to working with sector operators and consumers in order to achieve the fundamental objective of guaranteeing the community an efficient, sustainable and transparent energy market.

Q. What is important to do?

We should first understand whether the market configuration is suitable to guarantee the existence of a sufficient number of sellers to promote competition. Or if, instead, we are opening a market that will inevitably see few sellers.

Q. What is Audax Energia's position with respect to the market that will emerge?

Audax Energia, in its process of growth and consolidation in the Italian market, has decided to pay particular attention to reviewing its commercial supply chain and the processes of interaction with its customers, in particular with consumers, in order to face a process of positioning research in the Italian market in full compliance with sector regulations, avoiding adopting abusive behavior that does not respect the customer.

Q. From a market and regulation perspective, could we say: "grow, yes, but above all do things well"?

In a certain way, yes. Although the energy sales sector is experiencing strong development, both in terms of billing and the players involved, we must not forget its dependence on constant regulatory updating and the variability of the policies to be implemented.

Q. What are the possible critical issues to take into consideration?

One of the main ones, which cuts across all companies in the sector, concerns the consequences of non-payment of energy bills by end customers. A critical issue - unfortunately on the rise in recent years - whose repercussions are entirely on sellers and which, with the economic crisis from which both Italian companies and families have suffered, has only worsened. Furthermore, the current rules provide that sellers - in addition to managing the lost revenue directly linked to their business (raw materials and marketing costs) - must advance the payment of other items on the bill, the weight of which has grown dramatically.

 Q. Let's imagine these are large sums...

Every year it involves billions of euros. Energy sales companies must pay distributors and transporters the amount to cover the related transport or distribution costs, in the bill borne by consumers, in addition to paying the general system charges, regardless of whether these have been paid by the customer or not. the final. These obligations which, regardless of the sellers' actual collection, determine potential imbalances between what is (not) collected and what they are obliged to pay. Furthermore, the increased risk of non-payment of bills has pushed the Authority to ask sellers to provide extensive guarantees to distributors and transporters: today a guarantee equal to three months of charges must be given, calculated on the basis of the volumes of each customer . However, to limit the immobilization by sellers of financial resources used to meet the required guarantees, ARERA has also provided for the possibility of replacing them with a credit rating, which can also be borrowed from the group to which the seller possibly belongs .

Q. For medium-small sized players (and there are quite a few) the situation will not be so simple...

Given the market context and forecasts for the next few years, the current market design risks leading to an increase in concentration in the sales segment, with the disappearance of independents. Liberalization must therefore be seen as a guarantee of plurality within the market.

Q. And how does Audax position itself in relation to this scenario?

On this aspect, Audax Energia counts on the support of a solid, strong parent company with a credit quality that provides the leverage to face the growth of the company in Italy.

Q. Let's go back to the topic of risk linked to customer arrears, what measures can be taken to resolve it or at least mitigate it?

This is a problem that is not easy to solve. Legislators and regulators should ask themselves who can most appropriately support it and study risk-sharing mechanisms that are more efficient than the current ones. According to Unirec (the national association of debt collectors) in 2015 alone, the value of unpaid bills in Italy amounted to 6.4 billion. In 2017, Eni, EON and Sorgenia were forced to cede 500 million euros of unpaid debts relating to unpaid electricity and gas bills from families, VAT numbers and small or medium-sized companies in Italy to "bill hunter" funds, with a aging between 700 days and 5 years ("Corriere della Sera").

Q. These are numbers that outline a picture that is anything but easy...

Some data to better outline the situation. Although in the first quarter of 2018 there were positive results from Italian companies and a decrease in companies' serious delays in payments to suppliers (compared to a year ago, payments over 30 days late, one of the main indicators of the state of health of businesses, in fact they fell by 10.8%), we come from a period of strong crisis both in Italian companies and in families, and from a subsequent recession which is still being felt in the performance and payment habits of end customers. However, only one in three companies respects the times agreed with suppliers: in March 2018, 37.2% of companies pay on deadline, 52.1% within the month of delay, while 10.7% is the percentage of serious delays. A percentage, the latter, which has reached its historic minimum from 2012 to today, although compared to 2010 it is still higher than the 94.5%. However, the crisis of companies operating in the retail sector continues; in fact, only 26.5% of companies in the sector have regularly paid their suppliers, compared to 16.1% of companies that have accumulated significant delays in terms of payments and a large number of companies (57.4%) that have recorded delays within 30 days (Cribis). 

Q. The difficulty of businesses, in a cascade mechanism, also becomes your difficulty...

Yes, and the consistency of the phenomenon of users' failure to comply with their payment obligations for the supply of gas and electricity has, in the last decade, forced the regulator to intervene on the matter. However, the conflicting interests that ARERA was called upon to reconcile are not easy to resolve: on the one hand it must be considered that users are "consumers" of essential services; on the other hand, the administrators must have at their disposal ordinary tools for reacting to non-fulfilment of the contracts for corresponding services. In allowing the interests of consumers and those of sellers to coexist, ARERA has adopted some caution by limiting the possibilities of self-protection of suppliers who cannot adopt "drastic remedies" such as interrupting the service without following precise rules and sometimes long deadlines that protect the consumer (perhaps in the event that the end customer does not pay because he disputes the calculation criteria adopted on the invoice). Added to this is the reduction of the limitation period from 5 to 2 years for credits relating to the sale of energy and gas introduced by the 2018 Budget Law.

Q. So what are the actions planned by Audax Energia to address this situation?

To address this contingency of the Italian market, Audax Energia has decided to invest in the development and improvement of the efficiency of the credit management and recovery processes, as well as credit risk assessment and scoring, also making use of the new avenues that the 2017 Competition Law has open to companies in the utility sector for the use and consultation of SICs, i.e. Credit Information Systems, during the potential customer evaluation phase.

(In fact, within the SIC all the data relating to the credit request/relationship are recorded, describing the type of contract, the amount, the reimbursement methods and the status of the request or execution of the contract; furthermore there are the information relating to the periodic trend of payments, any debt collection activities implemented and current disputes. All this information, processed, gives rise to a sort of financial reliability scoring).