- Thirty years of independent regulation. ARERA and its founding law
The recent appointment of the new board – the fifth since those chaired by Pippo Ranci, Alessandro Ortis, Guido Bortoni and Stefano Besseghini – provides an opportunity to reflect on the role of the Regulatory Authority for Energy, Networks and the Environment (ARERA). A new phase has thus begun in the work of an authority which, as is well known, has since 1995 seen its remit expand from the electricity and gas sectors to those of water and the urban waste cycle, as well as district heating.
Law 481/1995, now in force for more than thirty years, can now be defined as the general law of regulation. In recent years, marked by the resurgence of the independent regulation model, whenever the legislator has extended ARERA’s powers or created a new regulator, such as the Transport Regulation Authority (ART), it has referred to the principles and powers of this law[1] . Consequently, the regulatory system for major national network public services (gas, electricity) and some of the main local public services is essentially based on a framework law and a single regulator, endowed with a range of powers (regulatory, administrative, judicial), which are exercised across different and diverse sectors.
ARERA is thus configured as a multi-sector regulator. This structure reflects the underlying market dynamics where, alongside smaller operators, multi-utility companies are establishing themselves, able to benefit from dealing with a single entity (a plurality of regulators could in fact result in different and inconsistent regulatory approaches). A single regulator, on the other hand, can ensure consistency in principles, frameworks and methodologies, thereby guaranteeing, on the one hand, economies of learning; and on the other, certainty and reliability.
Among the main advantages of the multi-sectoral model is also the extension, even to other regulated sectors, of the high degree of independence that has characterised the energy regulator since the directives of the so-called ‘third energy package’[2] .
Law No. 481 of 1995 withstood counter-pressures that initially sought to hinder the establishment of the so-called regulatory state, by returning certain powers to the ministerial sphere.
- Independence from the executive
The independence of ARERA, like that of other regulatory authorities, is also justified by the need to prevent conflicts of interest between the regulatory state – which must act as a neutral arbiter between competing firms – and the entrepreneurial state, which remains a shareholder in companies operating in various markets (such as Enel or Eni) and which, conversely, has an interest in promoting their development, even at the expense of their competitors. This is one of the cornerstones of the British regulatory paradigm introduced in the 1980s and adopted in Italy in the 1990s[3] .
The issue of ARERA’s independence from the executive takes on all the more significance given that the energy governance system, whilst fragmented (between European and national authorities and private companies with regulatory functions such as GSE S.p.A.), is configured at national level as ‘structurally dualistic’, to the extent that the Ministry of the Environment and Energy Security (MASE) sometimes appears to assume the role of a ‘second regulator’ alongside ARERA[4] .
Moreover, Law No. 481 of 1995 itself establishes that the regulatory authorities “operate with full autonomy and independence of judgement and assessment”, without prejudice to “the Government’s policy-making functions in the sector” and granting the Government the power to set out, within the economic and financial planning document, “the framework of development requirements for public utility services that correspond to the general interests of the country” (Article 2, paragraphs 5, 14 and 21 respectively).
There is debate over what constitutes the right balance between the Government’s prerogatives and the regulatory authority’s powers. It is generally held that the latter cannot be influenced in its decisions—particularly those based on technical findings and assessments that do not involve discretionary political choices—by precise and specific instructions from the Government; it must, however, take into account the industrial policy objectives set out by the Government.
That said, in general terms, the organisational model of ARERA, which is headed by a collegiate body consisting of the President and four members (Article 2, paragraph 7, Law No. 481/1995), is in line with that of other independent regulatory authorities. To ensure independence from the Government— —the appointment procedure provides for a binding opinion, by a two-thirds majority of the members of the relevant parliamentary committees, on the candidates proposed by MASE and approved by the Council of Ministers. The appointment is formalised by decree of the President of the Republic (Article 2, paragraph 7, Law No. 481/1995).
In order to promote the independence of the body, members serve for a term of seven years (non-renewable) and may not engage in any other professional activities during their term of office. For the two years following the end of their term of office, they may not enter into any collaborative, consultancy or employment relationship with undertakings operating in the sectors falling within the Authority’s remit (Article 2(8) of Law No 481/1995).
ARERA independently defines the procedures and regulations governing its internal organisation, operation and accounting. The resources for the Authority’s operation do not come from the State budget but from a levy on the revenues of regulated operators, which guarantees its independence in terms of available financial resources.
ARERA’s status of independence, defined by Law 481 of 1995 as well as by European directives, appears to be one of the most advanced within the national legal system.
In terms of structural independence, the collegial nature of the body (five members) ensures that decisions are less susceptible to external influence and also provides a certain diversity of professional expertise within the board[5] .
In recent rounds of appointments to the regulatory boards, a certain predominance of legal and administrative expertise has emerged, to the extent that economic and technical expertise has at times become a minority, particularly in the most recent rounds of appointments: a regression, according to some, which “has led to the substantive aspects of regulatory intervention being sacrificed in favour of legal and formal aspects”[6] . However, bucking this trend, the newly appointed ARERA board, like the first one – that led by Prof. Ranci –[7] – lacks legal expertise.
Secondly, the members of the board must be selected on the basis of professional and competence requirements (Law 481 of 1995, Article 2, paragraph 8, refers to “high and recognised competence in the sector”). In practice, the appointment of independent authorities, particularly in recent rounds, has in truth often failed to meet these criteria, partly due to the vagueness with which they are set out in the various laws and the fact that appointments are essentially beyond judicial review.
A solution envisaged by the bill presented in the 15th Legislature, ‘Provisions concerning the regulation and supervision of markets and the functioning of the independent authorities responsible for them ’ (Senate Bill No. 1366), provided, at the very least, for the ‘publication of the curriculum vitae and hearing of the designated persons’ (Article 16, paragraph 3)[8] .
Thirdly, again to ensure independence, the term of office of the governing body is, in the case of ARERA, seven years; this ensures a misalignment with the five-year electoral cycle and thus greater detachment from the political balance of the moment. Furthermore, the Authority is subject to the rule that members of the board may not be reappointed for a second term (see Article 2, paragraph 8, Law No. 481/1995), which makes them less susceptible to influence, as they are immune to the temptation to exercise their powers in a complacent manner, that is, in the hope of being reappointed.
For members of ARERA, as well as other independent authorities, there is also a ban on the so-called ‘revolving door’, i.e. moving directly from one authority to another, to avoid the temptation to accumulate ‘credits’ during their term of office and to prevent membership of the governing bodies of these authorities from becoming a sort of ‘profession’, regardless of the specific expertise required to regulate individual sensitive sectors[9] .
To avoid undue influence, members cannot be dismissed by the government during their term of office. European regulations, which are much more precise in this regard, stipulate that dismissal is possible only if the requirements for the appointment are no longer met or in the event of the commission of offences (see, for example, Article 35 of Directive 72/2009). At national level, however, no legislation specifies the type of offences or the type and stage of investigation (criminal, administrative) that might justify removal[10] .
Finally, for members of ARERA (as well as for those of the Transport Regulatory Authority – ART, but not for the Bank of Italy or Consob), subsequent incompatibilities also apply, in the form of a prohibition (subject to financial penalties) on taking up positions in regulated companies for a minimum number of years following the end of their term of office (Law 481 of 1995 originally provided for a period of four years, now reduced to two)[11] . This latter rule – which, in the case of ARERA, also extends to senior managers – is primarily intended to ensure independence from private interests, which are often suspected of being able to ‘capture’ the institutions responsible for regulating them.
A further safeguard is provided by the role of Parliament, as the appointment of members of the collegiate body is not, in fact, the exclusive prerogative of the government, as is usually the case for public bodies. In the case of ARERA, the appointment requires a binding opinion adopted by a qualified majority (two-thirds) of the relevant parliamentary committees[12] . Moreover, even qualified majorities can encourage the sharing of posts between the political forces of the majority and the opposition. In reality, no appointment system absolutely guarantees the independence of the members of the collegiate bodies , which ultimately depends on the institutional sense of those making the appointments, which has sometimes been lacking.
- The dual regulation by the Government and ARERA in administrative case law
European case law recognises a reserve of technical regulatory power vested in independent authorities, which extends in relation to both the government and the legislature. In 2021, the Court of Justice held that the power to set tariffs for access to national energy networks ‘falls within the powers reserved directly for the National Regulatory Authorities’, whose autonomy extends not only vis-à-vis any political body but also vis-à-vis the legislature, ‘which cannot withdraw part of those powers from the NRAs and assign them to other public bodies’[13] .
At national level, the Council of State ruled that the Government “cannot exercise a power (of regulation) reserved by law to the Authority” (this concerned the then Authority for Electricity and Gas)[14] . Subsequently, the Lombardy Regional Administrative Court, after reiterating that the government cannot issue specific prescriptions or “instructions”[15] regarding the content of the Authority’s decisions, recognised a sort of duty of independence on the part of the energy regulator, criticising “the slavish implementation of the ministerial directive”, through which ARERA had “in essence abdicated the exercise of its inalienable regulatory powers as unequivocally set out by EU law and domestic legislation”[16] .
The energy sector offers a unique vantage point from which to observe the dialectical relationship between independent regulation and government policy, in light of the “structurally dualistic” system of governance that has emerged, in which the relevant Ministry sometimes appears to assume the role of a “second regulator”[17] . Consequently, as already mentioned, a “slow but inexorable erosion”[18] of the regulatory sphere has been underway for some time now. This is the result of regulations which, by dividing powers between the regulator and the government, in many cases relegate the independent authority to a purely advisory role—and not even one with the power to make proposals—which, at the very least, would make it rather burdensome for the government to deviate from the regulator’s recommendations.
In the energy sector, moreover, vertical conflicts are not uncommon, i.e. between entities situated in ‘upstream’ and ‘downstream’ segments or stages of the ideal regulatory chain that runs from the government’s policy directives to detailed technical regulations, and which manifest themselves through the adoption of government policy directives that encroach upon the regulator’s powers in defining technical rules.
In an ideal division of responsibilities, political bodies should adopt decisions of a general nature, whilst the authorities should be called upon to define, in detail, the most appropriate technical rules for the functioning of the markets entrusted to their care. Indeed, according to Law No. 481 of 1995, the regulation of public utility services must take into account “the general policy guidelines formulated by the government”, as stated in Article 1, paragraph 1. In practice, however, drawing the line between economic policy decisions and independent regulation is not always straightforward, as evidenced by the numerous conflicts, some of which have remained, so to speak, latent; others, however, have resulted in more open disputes or even in legal proceedings before the administrative court. In one case, the Energy Authority turned to the administrative court to safeguard its sphere of powers, which had been infringed by a policy document issued by the Ministry of Economic Development, which had effectively taken the place of the regulator in adopting the specific technical rule. At first instance, the Lazio-Rome Regional Administrative Court[19] dismissed the Authority’s appeal, identifying “a sort of overlap of competences according to a material criterion between the Ministry and the Authority, describable in terms of concentric circles of varying extent, in a relationship of containment/specialisation”. However, the judgment was overturned by the Council of State[20] , which held that the Ministry “cannot exercise a power (of regulation) reserved by law to the Authority”.
The Administrative Court of Florence ([21] ) reaffirmed this position years later, in 2023, stating that “the general principle of the Authority’s autonomy and independence is, in fact, exercised within the scope of a policy-making power, which cannot, however, extend to dictating specific and detailed requirements, given the need to shield administrative regulation in the energy sector from direct influence by political bodies, which could distort competitive dynamics”. In this specific case, ARERA had disapplied Article 114-ter of Decree-Law No. 34 of 19 May 2020, which directly recognised in tariffs the investments made to build the natural gas distribution network in ‘new natural gasification’ areas. This was a prime example of ‘legislative absorption of regulation’[22] , which also undermines independence. This is particularly so when the law takes the form of a ‘provisional law’ or an ‘emergency decree’, as the government, with the endorsement of parliament, strips powers from the independent regulator in order to exercise them directly. In a similar case, the Court of Justice itself[23] had already erected a barrier against political interference, in relation to a decree-law by which the Italian government had replaced the beauty contest decided by another regulatory authority (AGCOM) for the allocation of digital frequencies with a tender procedure involving payment, holding that “The independence of such an authority would be compromised if external bodies, such as the Italian Minister for Economic Development and the Italian legislature in the main proceedings, were permitted to suspend or even annul … a selection procedure for the allocation of radio frequencies currently underway and organised under the responsibility of the aforementioned authority”.
The Government/ARERA dynamic also emerges in a recent ruling by the Council of State[24] which establishes a sort of inverse correlation between administrative discretion and independence, observing that “in cases where the independent authority is involved in the broadly political weighing up of interests, it should (strictly speaking) see its functional independence limited and respond to government guidance, in order to overcome the lack of accountability arising from its institutional position (i.e. outside the representative political circuit of referred to in Article 95 of the Constitution)”. Independence is, by contrast, “full” in the exercise of technical assessment powers[25] , when, for example, the regulator applies the principle of cost reflectivity which, through the prior recognition of efficient costs, guarantees increases in fees linked to operational improvements and higher service performance[26] .
Conflicts or poor coordination along the chain of the law conferring powers – ministerial directive – regulatory act can undermine legal certainty, which is essential for any rational economic planning by regulated undertakings. This is also due to the lengthening of the time required to establish stable rules (consider the extreme case of ‘internal’ disputes between the Government and the Authority), which in itself is capable of undermining the legitimate expectations of private individuals. From this perspective, the problem also lies in the effects – appreciable in objective terms – that the uncoordinated distribution and exercise of regulatory power has on economic operators, undermining the right to legal certainty.
- The crisis of independent powers and independent powers in crises
Independent authorities are institutions not embedded within the democratic system and are instead rooted in the Madisonian model of democracy which, through certain countervailing powers, seeks to disperse, delegate and limit the risk of the tyranny of the majority. Such a model of democracy appears today to be under attack from multiple fronts.
As regards regulatory authorities, in the United States, where the independent regulatory agencies model originated in the late 19th century, the irrevocability of federal agency members has been called into question.
In 2020, the Supreme Court ruled that the dismissal of the Director of the Consumer Financial Protection Bureau was lawful[27] . Recently, the same Supreme Court suspended the injunction issued by the District Court for the District of Columbia ordering the reinstatement of a commissioner of the Federal Trade Commission and would therefore appear inclined to uphold President Trump’s dismissal ‘without just cause’.
These cases revolve around the interpretation (whether broad or narrow) of a landmark Supreme Court precedent, in which the removal of a Federal Trade Commission (FTC) commissioner was ruled unlawful because it had been carried out outside the limited grounds provided for by law (inefficiency, negligence or misconduct in the performance of duties)[28] . The precedent in question drew a distinction between agencies exercising essentially ‘executive’ powers, which must therefore be subject to more penetrating presidential control, and agencies which – like the FTC in 1935 – exercise, instead, powers that are ‘predominantly quasi-judicial and quasi-legislative’, and which must therefore remain shielded from presidential interference.
Then there are President Trump’s repeated threats to the independence of the Federal Reserve Commission (FED) and against FED Chairman Jerome Powell, who has even been accused of embezzlement[29] . In the energy sector, Chairman Phillips of the Federal Energy Regulatory Commission (FERC) was also the target of fierce attacks by the President, culminating in his resignation in April 2025, and the FERC, like other independent agencies, was the subject of the executive order of 18 February 2025 “Ensuring Accountability for All Agencies”, aimed at subjecting “significant regulatory actions” to scrutiny by the Office of Information and Regulatory Affairs (OIRA) within the Executive Office of the President.
All this undermines the model of the regulatory state, which presupposes, at least implicitly, a constitutional order inspired by the model of liberal democracy which, as already emphasised, provides for the existence of a complex system of checks and balances designed to prevent the tyranny of the majority emerging victorious from an electoral contest.
The financial and economic crisis of 2008 had already caused the first cracks to appear in the regulatory state, exposing numerous ‘regulatory failures’ that forced it to give way to the ‘rescue state’, with its heavy-handed ‘visible hand’. The need to strengthen the state’s active presence in the economy and the market also emerged during the Covid-19 pandemic that erupted globally in 2020. Indeed, measures providing direct or indirect support to economic activities were introduced, moving away from the paradigm of market regulation.
As the pandemic has shown, crises necessitate, on the one hand, swifter – and perhaps less consultative – decisions, sudden adjustments, areas exempt from regulation, extensions to deadlines for operators to meet onerous reporting obligations, a relaxation of pressure regarding performance and service quality targets, the creation of public funds capable of supporting new investments and guaranteeing those already planned, accompanied by regulatory measures offering incentives or leverage, and the coverage through tariffs of the extra costs generated by the emergency; on the other hand, particular attention to consumers and small and medium-sized enterprises in difficulty, for example through the strengthening of the so-called social bonus, payment plans, and the mitigation of supply disconnection procedures, with a view to emergency regulation. Having abandoned the claim to build a perfect system of rules, but drawing strength from its pragmatic and evolutionary identity, regulatory activity must therefore accept, albeit temporary, exemptions and derogations from the system established to date. Only in this way can regulation achieve, even in difficult times, its ‘ultimate goal’ of creating certainty and instilling confidence in the relevant contexts. In an energy crisis such as the current one, government pressure on the Authority is almost inevitably set to increase, demanding that tariff powers be exercised in such a way as to help reduce energy prices, to the benefit of households and businesses. Such pressure, exerted through stringent policy directives, may undermine the regulator’s functional independence.
The trajectory of the regulatory state therefore appears, for many reasons, to be on a downward slope. A recovery cannot be ruled out, but much will depend on the duration of the current political and institutional cycle, which is difficult to predict. There is also a need for a strategy that takes a more unified view of ‘economic regulation’ and ‘social regulation’ in order to provide greater protection for those economic groups most affected by the negative effects of the rapid evolution of markets and the mechanism of ‘creative destruction’ theorised by Schumpeter.
In any case, in the Italian context, thirty years on from Law No. 481 of 1995, the model for regulatory authorities should undergo a comprehensive review. With particular regard to the appointment mechanisms and other safeguards for independence examined, it would be necessary to revisit the proposals put forward a few years ago to introduce, by law, a common statute for the main authorities, so as to strengthen their role and prestige, which in some cases has been tarnished[30] .
[1] It all began with Decree-Law No. 201 of 6 December 2011 (Article 21, paragraph 19), converted into Law No. 214 of 22 December 2011, which transferred to the energy regulator “the functions relating to the regulation and control of water services”, to be exercised “with the same powers conferred on the Authority itself by Law No. 481 of 14 November 1995”. Subsequently, Legislative Decree No. 102 of 4 July 2014 (Articles 9 and 10, paragraphs 17 and 18) conferred upon the Authority further powers in the field of district heating and cooling and, in particular, “powers of control, inspection and sanction provided for by Law No. 481 of 14 November 1995”. Subsequently, Article 1, paragraph 527, of Law No. 205 of 27 December 2017 provided that the “regulatory and control functions” in the field of waste are assigned to ARERA “with the same powers and within the framework of the principles, objectives and powers, including those relating to sanctions, established by Law No. 481 of 14 November 1995”. In this context, reference may also be made to the reference to Law No. 481 of 19𪡟 , made by Article 37(1) of Decree-Law No. 201 of 6 December 2011, converted into Law No. 214 of 22 December 2011, No. 214, which established the Transport Regulatory Authority, stipulating that the new regulator shall operate “within the scope of the regulation of public utility services referred to in Law No. 481 of 14 November 1995”. The Constitutional Court (No. 41/2013) also affirmed that the Authority “forms part of the system of independent regulation of public utility services established by Law No. 481 of 14 November 1995”, further specifying that the organisational and operational provisions set out in that same law “apply to that authority, insofar as they are compatible”.
[2]The directives of the so-called third energy package affirm the independence of national regulators “from any other public or private entity” and the prohibition on accepting “direct instructions from any government” (see, for example, Article 35(4)(a) and (b) of Directive 2009/72/EC).
[3] This framework is well described by F. MERUSI, ‘The regulation of services of general economic interest in (partially) liberalised markets: an introduction’, in E. BRUTI LIBERATI – F. DONATI (eds.), The regulation of services of general economic interest, Turin, 2010, p. 2.
[4]See E. BRUTI LIBERATI, Independent regulation and national energy policy, in Riv. reg. mercati www.rivistadellaregolazionedeimercati.it , 2014, p. 90.
[5] For reasons of cost containment, the number of members of the boards of certain authorities, such as the Italian Competition and Market Authority (AGCM), has been inappropriately reduced to three, thereby making the role of the President even more decisive, as he or she is unlikely to be outvoted.
[6] A. MACCHIATI, Why Italy is growing so little, Bologna, 2016, p. 70, and Id. An authority for legal experts?, in Market, competition and rules, 2016, p. 341, regarding the Italian Competition Authority.
[7] As noted by P. RANCI, ‘The launch of the authority: a retrospective assessment’, in F. MERUSI – S. ANTONIAZZI (eds.), Twenty years of centralised regulation of local public services, Turin, 2017, p. 21.
[8] One might consider, for example, the open selection procedure – with qualification requirements that are more stringent than those laid down at national level – applied to the European Securities and Markets Authorities: see EU Regulations Nos 1093, 1094 and 1095/2010.
[9] See Article 22(1) of Decree-Law No 90 of 24 June 2014, converted into Law No 114 of 11 August 2014.
[10] In this specific sector, Legislative Decree No. 185 of 8 November 2021, implementing EU Directive 2019/1, provides, in rather precise terms, for the removal or dismissal of members of the AGCM in the event of the application of the additional penalty of disqualification from public office following a final and binding judgment.
[11] The Council of State (Section VI, 30 November 2007, No. 341), in the so-called ‘Meocci case’, ruled that the appointment of a former member of the Communications Regulatory Authority (AGCOM) as Director-General of RAI was unlawful.
[12]See M. MANETTI, On the autonomy and independence of authorities, in Riv. AIC, No. 3/2023, p. 44.
[13] See judgment of 2 September 2021, C-718/18, Commission of the European Communities v Federal Republic of Germany.
[14] See Section VI, 28 March 2008, No 1274.
[15]In this regard, see also, with reference to the Belgian Energy Regulatory Authority, Court of Justice, 3 December 2000, C-767/19, European Commission v Kingdom of Belgium, in particular paragraph 110.
[16] See Lombardy Regional Administrative Court – Milan, Section I, 28 November 2019, No. 2538.
[17] In this regard, E. BRUTI LIBERATI, Independent Regulation and National Energy Policy, in Riv. reg. mercati www.rivistadellaregolazionedeimercati.it , No. 1/2014, p. 90.
[18] See M. CLARICH – F. SCLAFANI, The regulation of energy markets, in Various Authors, Energy governance for the country’s development, Bologna, 2012, p. 277.
[19] See Section III-ter, 2 May 2006, No. 3017.
[20] See Section VI, 28 March 2008, No. 1274.
[21] See Lombardy-Milan Regional Administrative Court, Section II, 23 May 2023, No. 1228.
[22]As defined by S. CASSESE, Law No. 481/1995. Crisis of the independent authorities, in Energia, No. 4/2015, p. 10. The decree-law, superseding the Authority’s technical assessment, in fact considered infrastructure investments to be “efficient and already positively assessed”, and therefore eligible for “full tariff recognition”.
[23] See Section IV, judgment in Case C-560/15 of 26 July 2017.
[24]See Section II, 7 March 2024, No. 2255.
[25]On this point, see E. BRUTI LIBERATI, La regolazione indipendente dei mercati, op. cit., p. 82 ff.
[26] Moreover, a recent judgment of the Plenary Session of the Council of State of 7 November 2025, No. 16, appears to grant ARERA scope for discretionary assessment, ruling as unfounded the assertion “that the regulatory authority, due to its lack of democratic legitimacy, cannot, when determining tariffs, exercise discretion based on a balancing of interests”.
[27] In the case of Seila Law v. Consumer Financial Protection Bureau.
[28]This concerns the 1935 case of Humphrey’s Executor v. United States, in which the Commissioner, William Humphrey, appointed by the Republican President Herbert Hoover, was dismissed by the subsequent Democratic President Franklin Roosevelt. On that occasion, the Court affirmed, in defence of independence, that the FTC “Such a body cannot in any proper sense be characterised as an arm or an eye of the executive” and that, therefore, its functions “must be free from executive control”.
[29] It is also worth noting the dismissal of a member of the Federal Reserve, Lisa Cook, ordered last August by the President of the United States, Donald Trump, in relation to which a ruling by the Supreme Court is awaited; indeed, last autumn the Court issued a provisional order requiring her to remain in office until the final ruling.
[30] See, in particular, the study prepared by the NEXUS Association, ‘The System of Independent Authorities: Problems and Prospects’, 2006, with a background report by M. Clarich, G. Corso and V. Zeno-Zencovich.
