Demand for Natural Gas in Italy
(in billions of m3) 2005 2004 % change
Services and residential customers 30.1 28.3 6.5%
Industrial users 21.7 22.1 (1.6%)
Thermoelectric power plants 32.9 28.9 13.9%
Transportation 0.5 0.3 66.7%
Total demand 85.2 79.6 7%
Source: MAP final data for 2004 and preliminary year-end data for 2005.
Demand for natural gas grew to about 85 billion cubic meters (including system usage and leaks), a gain of about 7% compared with 2004.

This increase, which comes on the heels of the gains recorded in previous years (+13.9%), fueled by the startup of new combined-cycle power plants that are being brought on stream in anticipation of a surge in demand for electricity in future years.
The rise in consumption by residential customers, while not as high, was also substantial (+6.5%). Inclement weather, with temperatures falling below the seasonal average during the early and closing months of the year, is the reason for this increase.
This weather pattern forced the Ministry of Production Activities to avail itself of the option of declaring a weather emergency on two separate occasions in 2005. The first, in February and March, resulted in a supply cut-off to interruptible dual-fuel users and required a partial utilization (about 1 million cubic meters) of the strategic reserve on a system-wide basis, which had a negative financial impact on industry operators. On the second occasion, which occurred on December 23, 2005, the weather emergency was caused by very large withdrawals by the natural gas storage system in November and December 2005.
These withdrawals became necessary as a result of the unusually cold weather pattern mentioned above, which affected all of Italy starting in November 2005. They also reflected general economic factor, the most significant of which was a supply shortfall - an issues that continued to be in the news early in 2006 - caused by cutbacks in deliveries from Russia (due to transit issues in the Ukraine and the wave of
The new Torviscosa (UD) power plant is being built next
to a landmark Snia facility, providing a perfect architectural bridge between past and present.
extreme cold that swept Russia, the Ukraine and all of Europe) and Libya (due to technical problems).
Contrary to what happened in the thermoelectric, residential and transportation segments of the market, demand from industrial users decreased, but only by a limited amount (1%).
Overall, 39% of natural gas supplies are currently used for thermoelectric production, 35% for residential uses and 26% for industrial applications. Demand from transportation users accounts for less than 1% of the total.
With regard to supply, a reduction in domestic production (about 12 billion cubic meters, or 8%, less than in 2004, in line with past trends and future projections) was offset by a rise in imports (+8% in 2005), particularly gas coming from Libya through the new Greenstream pipeline, which was commissioned in October 2004.
Regulatory Framework
Electric Power
The main legislative measures and other significant developments that affected the regulatory framework of the electric power industry in 2005 are reviewed below.
General Regulations
The issuance of Resolution No. 19/05 marked the completion of an inquiry carried out by the AEEG, together with the Italian antitrust agency, to determine the level of deregulation of the electric power industry. The inquiry showed that the situation is unsatisfactory in terms of competition and efficiency in the supply of electric power at the wholesale level. In October, upon the conclusion of this inquiry, the AEEG issued Resolution No. 212/05, enacting measures designed to promote competition in the wholesale electric power market. The tool that is being developed for 2006 to achieve this goal is significantly different from the method used in 2005. The new method is based on the sale of virtual production capacity (the so-called Virtual Power Plant).
With regard to the rules enacted to control market power (Resolution No. 254/04), the portion of the
Demand for natural gas grew to about 85 billion cubic meters (including system usage and leaks), a gain of about 7% compared with 2004.
This increase, which comes on the heels of the gains recorded in previous years (+13.9%), fueled by the startup of new combined-cycle power plants that are being brought on stream in anticipation of a surge in demand for electricity in future years.