Economics of the 96/92 Directive with Reference to Italian Electricity Market Liberalisation Process

This paper contains an economic review of the law regulating the liberalisation process now under way in the Italian electricity sector. The legal framework is presented focusing first on Community rules, in particular Directive 96/92, which provides for common rules for the internal electricity market, and then on the recent Italian implementation decree no. 79 of 1999. The part concerning the law is then connected with a part where the issue of liberalisation of the electricity sector is tackled in economic terms, with special focus on transition from the public monopoly that has characterised the Italian experience for some time, and also on the new interpretation of the traditional theory of natural monopoly. On the base of the legal framework and the economic theories, the features of each components of the electricity sector is finally analysed in terms of competitiveness: in particular, the future market configuration is considered for generation, for transmission, for distribution, and, for the whole market.