The recent reform of the Italian Constitution had a prominent impact on the regulation of the energy sector. The legislative power in this sector was formerly held by the central State and is now shared by State and local authorities (Regions). In this paper we will discuss and evaluate the new legislative power in the energy sector. We wish to analyse the differences between the old and the new system and whether the reforms, through their deeper involvement with local authorities, will lead to an improved government. It is important to stress the need for a timely co-ordination between the different levels of government. The negative externalities of the production and transportation of energy can be best considered if local authorities are involved in the decision making process. However, this greatly increases transaction costs.