The EU directive on “common rules for the internal energy market” (96/92/EC) was implemented in Italy with the release of Decree 79 of 1999 starting the process of the liberalization of the energy sector which would, in some years and through the application of new rules, lead to the current organizational structure of the market. The goal was to create and effectively regulate the market for electricity generation as well as sale of electricity based on the principles of competition, transparency and neutrality. This sector changed from a monopoly to a complex mechanism, with a plurality of parties competing to offer services and products to consumers rather than users. Currently present on the market are: production companies, one transmission operator (Terna SpA), distribution companies and market operators active in energy supply and trading activities.
The prospect of generating value in the energy sector has attracted major investments allowing for a significant technological modernization, improved service as well as a widened range of services and products. With a free market, also the regulated market was forced to govern the relationship between supply and demand. As of January 1st, 2005, operators can buy energy to cover their energy consumption on the energy exchange (MPE Spot Electricity Market), while the launch of the futures market (MTE) and the electricity derivatives exchange (IDEX Italian electricity Derivatives Energy Exchange in November 2008) have completed the framework of a new dynamic market, now in a position not only to allow the physical supply of energy, but to provide better coverage as well as give indications of future prices for an extended period of time. Meanwhile, the regulator wanted to ensure an adequately safe system through which the availability of power production capacity balances the grid.
The way the electricity market has been structured, roles of different players (producers, consumers, managers, regulators, controllers) have been determined as well as having defined different trading venues for various products and services. Particularly, the following companies have been created: the Electricity Services Operator (GSE), the Electricity Market Manager (GME) which is entrusted with the organization and the management of the electricity market, and the Single Buyer (AU) which is given the role in guaranteeing the supply of electricity to households and small businesses.
The physical process of power generation and supply to cover consumption is of course at the base of this complex system, while the Authorities (which was specifically created: The Authority for Electricity and Gas) oversee the entire market.