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Energy pricing

The price of electrical energy for both eligible and non-eligible end customers is calculated so as to include all of the cost items related to the supply of electrical energy. It is therefore the sum of a number of components:

  1. generation costs, i.e. "energy production" costs
  2. transfer costs over the national transmission grid
  3. distribution costs over the local grid
  4. metering costs for the installation and maintenance of meters
  5. marketing costs, i.e. costs of buying and selling
  6. general system costs, i.e. "structural costs" that the former monopoly-holder has incurred to follow the evolution of the national energy system: the development of renewable sources, special rate plans, the dismantling of nuclear power plants, universal service for all Italian users, etc.
  7. taxes, such as VAT, state taxes and auxiliary provincial and municipal taxes

The liberalisation process mainly affected the generation component, but important changes were also introduced regarding the definition of the other cost components.

In regard to production, since 1999 eligible customers have been able to choose suppliers and therefore have been able to negotiate freely the price of energy generation either through open bilateral negotiations with producers and wholesalers or through exchange contracts negotiated on the electricity stock exchange.

The cost of generating energy is identical for all non-eligible customers since it is set by the Authority for electricity, gas and water:Authority for electricity, gas and water (AEEGSI), which determines the "cost of purchase" component every three months based on a calculation involving a "basket of combustible fuels" that fluctuates periodically, mainly in relation to the performance of the international crude oil market. Most of Italy's energy is produced with combustible fossil fuels (natural gas, oil and coal), with only a very small percentage from the exploitation of renewable sources such as the sun, wind, biomass, and so forth.

As for the other cost components, whereas they were previously set for both free customers and non-eligible customers solely on the basis of rates established by the AEEG, in 2000 a new rate system was introduced that has made important changes to the past system for all end customers (both free and non-eligible). Distributors now enjoy a much greater degree of flexibility than in the past in offering various rate options to their customers within the limits imposed by the AEEGSI. The criteria according to which distributors may set rate options include, for example, a division into a fixed and a variable rate (the former is independent of consumption, and the second increases along with consumption), time of day when energy is consumed, types of meter reading and invoicing of consumption or the method of payment. This method of determining the prices is currently being reviewed by the Authority for electricity, gas and water.


Page updated 24 July 2019

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