Italian Regulation of Electricity Distribution and its Impact on Efficiency, Investments and Innovation: A Qualitative Assessment

The increase in distributed generation and the pro-active role of consumers call for smarter networks. Consequently, regulation must change to promote this evolution. This article performs a critical overview of the Italian regulation of electricity distribution and its effectiveness in encouraging efficiency, quality and innovative investments. The analysis shows that the regulator has followed a building-block approach: throughout different regulatory periods, it has added new modules to its previous regulatory mechanism to take care of the constantly increasing set of objectives. This does not give DSOs a unitary and coherent regulatory framework and has led to the overlapping of different incentive mechanisms.