Edited by Felice De Lillo and Lucia Pagliari
Article 16-bis of Decree-Law No. 17 of 1 March 2022 (converted, with amendments, by Law No. 34 of 27 April 2022) introduces an incentive mechanism, better known as ‘energy release’, aimed at ensuring the full integration and medium-term remuneration of investments in renewable sources in the electricity market.
This decree provided for the GSE to offer a service of withdrawal and purchase of electricity from renewable sources produced by plants established in the national territory and to sell this energy, through the stipulation of long-term contracts with a duration of at least three years, through the information and negotiation tools prepared by the Gestore dei mercati energetici S.p.A. (‘GME’).
In compliance with the provision set forth in paragraph 3 of Article 16-bis cited above, and in implementation of this provision, the sale price offered by the GSE and the manner in which the GSE may sell the energy in its possession deriving from renewable source plants have been defined by the MiTE through Ministerial Decree No. 341 of 16 September 2022 (hereinafter also referred to as the ‘Energy Release Decree’).
In particular, the aforementioned implementing decree intervened in order to urgently and effectively reduce the price of energy, which had risen significantly as a result of the protracted Russian-Ukrainian conflict. As stated in the same decree, the regulatory intervention in question became necessary: ‘in view of the serious difficulties encountered by the business system due to high energy prices and the possible consequences also in social and employment terms’.
For these reasons, through the aforementioned decree a price cap was introduced to the price of energy sold by the GSE, establishing that ‘the price of the sale offer by the GSE is equal to 210 €/MWh’ (without prejudice to possible subsequent adjustments pursuant to the same decree).
The Energy Release Decree provides that the sale contracts entered into by the GSE with the assignees following the procedure of the GME (which will be discussed in greater detail below) fall within the type of so-called “two-way” contracts and regulate the difference between the allocation price of the energy available to the GSE offered for sale (i.e. 210 €/MWh) and the average monthly sale price on the organized electricity market regulated by the GME.
The conclusion of the energy release contracts by the GSE in implementation of the Energy Release Decree will take place on the basis of a procedure carried out by the GME on its trading platform in order to identify the successful bidders and the volume of electricity released to them[1] .
As part of the contractual relationships arising as a result of this procedure, as of 1 January 2023, the GSE will have to
- recalculate the energy awarded on the basis of the electricity in its possession on 31 January of each year;
- calculate, for the entire duration of the contract, in relation to a portion equal to 70% of the electricity awarded or redetermined pursuant to the preceding point, the difference between the allocation price as a result of the procedure (as of today, 210 €/MWh) and the average monthly selling price on the organized market of the electricity in its availability
- define the procedures and timeframes under which the GSE, in the event that the difference referred to in the preceding point is negative, shall disburse the relevant amount to the contractual counterparty or, in the event that the difference is positive, adjust or arrange to request from the purchasing company the corresponding amount.
The amount that the GSE will have to pay/receive in application of the aforementioned mechanism by its own definition has, in our opinion, the nature of a supplement of consideration and is therefore taxable for VAT purposes.
In summary, the Energy Release Decree provided that the GSE shall sign contracts for the sale of energy from renewable sources for two-way differences with energy-intensive companies[2] at a price equal to the difference between the administered price defined by the same decree and the average monthly sale price on the organized electricity market. This difference, if negative (i.e. price cap lower than the market price), will be disbursed by the GSE to the counterparty to the energy sale contract. If, on the other hand, the price cap is higher than the market price of the energy, the purchaser will have to pay the difference to the GSE.
The regulatory structure just described is entirely similar to the regulatory provision set forth in Article 15 of Decree-Law No. 4 of 27 January 2022 (the so-called extra-profits discipline). Which, it should be recalled, is referred to in Article 16-bis of Decree-Law No. 17 of 1 March 2022, as well as in the related Implementing Decree No. 341 of 16 September 2022, [3]having in fact the same purpose of effectively and promptly counteracting the increase in energy prices recorded in the historical reference period, in order to mitigate its effects.
It is no coincidence that the regulations set forth in the aforementioned Article 16-bis are aimed at those plants producing renewable energy that were excluded from the perimeter of application of Article 15-bis cited (i.e. dedicated withdrawal and on-site exchange)[4] .
The assimilation of the three aforesaid regulations is so evident that it is sufficient to make a synoptic reading of the relative provisions in order to deem that the Legislator – in drafting them – even resorted to the same literal tenor (as is clearly evident from the table below):
| Art. 15-bis, D.L. n. 4/2022 | Art. 5, paragraph 3, D.M. 341/2022[5] |
| “As of 1 February 2022, and until 31 December 2022, a two-way compensation mechanism on the price of energy shall be applied (…). For the purposes of paragraph 1, the GSE shall calculate the difference between) (a) a reference price equal to that indicated in the table in Annex I-bis to this decree with reference to each market zone; (b) a market price (…). Where the difference referred to in paragraph 3 is positive, the GSE shall pay the relevant amount to the producer. In the event that the aforesaid difference is negative, the GSE shall equalize or request from the producer the corresponding amount’. | For the entire duration of the contract, the GSE shall calculate, in relation to a share equal to 70% of the electricity awarded or redetermined pursuant to subparagraph (a), the difference between the allocation price as a result of the procedure referred to in Article 4 and the average monthly selling price on the organized market of the electricity available to it; (c) the manner and timing according to which the GSE, in the event that the difference referred to in subparagraph (b) is negative, shall disburse the relevant amount to the final customer or, in the event that the difference is positive, shall adjust or request from the final customer the corresponding amount […]”. |
As easily be seen from the table above, the operating mechanism of the provisions set out therein is entirely analogous. The only difference that can be discerned between the case at hand and the other provisions compared is that the “Energy release” discipline regulates the relationship between the GSE and the company purchasing the energy, while the other refers to the relationship between the GSE and the producer, there being, however, no differences in the practical application.
The full overlapping – both formal and substantive – of the aforesaid cases brings with it the inevitable and logical consequence that such mechanisms must be regulated in the same manner and that, therefore, the same tax treatment must be applied to them, under penalty of an obvious as well as unjustified disparity of treatment.
In the light of the foregoing, it is not considered that this mechanism gives rise to a taxable capital supply which would result in exclusion from the taxable amount for VAT purposes, but rather to a price supplement relevant for VAT purposes.
[1] The first procedure is reserved for priority end customers (also in aggregate form) and only in the event that the entire volume of available electricity has not been allocated, GME conducts a new procedure for non-priority end customers.
Priority end customers are those who, on the date of participation in the GME’s allocation procedure, are alternatively or jointly
- industrial end-customers, i.e. end-customers whose utilities refer to local units operating in the sectors of economic activity subject to the calculation of industrial production by the National Institute of Statistics (ISTAT)
- small and medium-sized enterprises as defined in European Commission Recommendation No 2003/361/EC of 6 May 2003;
- end customers located in Sicily and Sardinia and participating in the island instantaneous interruptibility and curtailment service pursuant to ARERA Resolution No. 558/2020/R/eel of 16 December 2020
- energy-intensive end customers referred to in the Decree of the Minister of Economic Development of 21 December 2017;
- energy-intensive end customers located in the islands of Sicily and Sardinia
[2] The priority end-customers for whom this procedure is intended are in fact those with high energy consumption and a high impact on their turnover.
[3] Below are the passages of the Preamble to the “Energy release decree” in which express reference is made to Article 15-bis cited above: “[…] having regard to Decree-Law no. 4 of 27 January 2022, converted, with amendments, by Law no. 25 of 28 March 2022 and, in particular, Article 15-bis which, in paragraph 3, letter a), establishes the reference price for the application of the two-way compensation mechanism to the electricity produced by renewable energy source plants referred to in the same article. […]the sale price offered by the GSE, appropriately valuing the different production profiles of the renewable source plants, taking into account the standard investment values of the individual technologies and the profitability of the investment, as well as in line with the values referred to in the aforementioned Article 15-bis, paragraph 3, letter a) of Decree-Law No. 4 of 2022; the manner in which the GSE may dispose of the energy in its possession deriving from renewable source plants benefiting from all-inclusive tariffs or from the long-term withdrawal and sale service within the mechanisms of the dedicated energy withdrawal referred to in Article 13, paragraphs 3 and 4, of Legislative Decree no. 387 of 2003 (hereinafter also: RID), or of the on-site exchange referred to in Article 6 of the same legislative decree (hereinafter also: SSP), to which paragraphs 1, 2, 3, 4 and 5 of the aforementioned Article 15-bis of Decree-Law no. 4 of 2022, guaranteeing that the same energy is sold as a priority to industrial customers, small and medium-sized enterprises, as defined in Recommendation No. 2003/361/EC of the European Commission of 6 May 2003, and customers located in the major islands and participating in the interruptibility and instantaneous island reduction service referred to in the Resolution of the Regulatory Authority for Energy Networks and Environment (hereinafter: ARERA) of 16 December 2020, no. 558/2020/R/eel; […] WHEREAS, by virtue of paragraphs 3(a) and 4 of Article 16-bis, for the definition of the transfer price it is necessary to: a) operate consistently with the values referred to in Article 15-bis, paragraph 3(a) of Decree-Law No. 4 of 2022”.
[4] According to the provisions of Article 16-bis, paragraph 3: “[…] the manner in which the GSE may dispose of the energy at its disposal deriving from renewable source plants benefiting from all-inclusive tariffs or from the long-term withdrawal and sale service referred to in paragraphs 1 and 2 of this Article within the framework of the mechanisms of dedicated energy withdrawal referred to in Article 13, paragraphs 3 and 4, of Legislative Decree no. 387 of 29 December 2003, or of on-site exchange referred to in Article 6 of the same Legislative Decree no. 387 of 2003, to which paragraphs 1, 2, 3, 4 and 5 of the aforementioned Article 15-bis do not apply, shall be governed by the provisions of Article 16-bis, paragraph 3. 387, or of the on-site exchange referred to in Article 6 of the same Legislative Decree No 387 of 2003, to which paragraphs 1, 2, 3, 4 and 5 of the aforementioned Article 15-bis of Decree-Law No 4 of 2022 do not apply […]
[5] Provision implementing Art. 16-bis cited above.
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