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GAS PRICING

Pricing gas


The final price of gas is determined by a number of components that remunerate all cost items tied to its supply. It is therefore the result of a variety of components:

  • cost of the procurement of the raw material, namely the "natural gas product";
  • cost of transport from the production site or storage fields along the large national pipelines under high pressure;
  • cost of distribution along the local pipeline networks for transfer to the medium-small customers;
  • cost of storage and despatching;
  • cost of wholesale and retail marketing;
  • taxes, which differ depending on the different territorial areas. The major taxes are the excise tax, VAT and revenue tax.

Following the sector's liberalization process, since 1st January 2003 the price can be freely determined only as far as the raw material procurement activity and retail marketing are concerned.

On the contrary, the costs for using the infrastructures (transport, storage, distribution) are established every three months by the Authority for Electrical Energy and Gas (AEEGSI). The same is true for the raw material cost, which is also calculated every three months by the AEEGSI based on the price of oil products.

So with regard to sales, every operator can offer alternative solutions to the customers. The customers can evaluate the different terms of purchase offered and freely decide to choose the supplier that offer the most reasonable terms of purchase, or those best suited to their needs.

Again with regard to sales, it has however become necessary to protect customers having medium-low consumption from the risk of steep upsurges of price due to competition still insufficient amongst the various operators. For this reason the sales companies have to apply a price of reference to those customers that have not yet chosen a contract different from the one in progress before liberalization. The price is calculated for each area based on criteria established by the Authority for Electrical Energy and Gas up until the time when they decide to change the contract. The price of reference must also always be offered to customers having consumption lower than 200,000 cubic metres/year as an alternative to the free market prices the sellers apply.

The price of reference established is made up of a fixed rate and a variable rate. The fixed quota, set at the beginning of every thermal year (from 1st October until 30th September of the following year) is to be paid regardless of the consumption for the part relevant to the period of reference (e.g. a quarterly bill will debit one-fourth of the fixed annual quota). This cost component is also broken down into batches with reference to annual consumption or to the delivery of the meter.

The variable quota, instead, is applied to the cubic metres consumed during the period being billed, and is usually broken down according to consumption batches with prices that fall as use rises. This component may vary every three months based on an indexing mechanism the Authority establishes that takes into account the changing energy raw material costs in the international markets.

In this way the Authority sets the goal of assuring that the choice of the new contractual terms the new operators offer is made without discontinuity with the system of guarantees in effect today, similar to what has occurred in various European countries that have already liberalized their markets. However, it also sets the goal of guaranteeing consumers in the areas where a sole supplier will continue to operate, which could alter the prices should there be no competition with other operators.

 

Page updated 24 July 2019

 
 
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