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Competitiveness in energy markets has consistently been on European Commission’s agenda, seen as a tool to lower prices, engage consumers and enhance the energy transition. To further promote retail competition, the European Commission is guiding reforms specifically targeting the abolition of protected tariffs. Regulated energy tariffs, adhering to specific regulations, will be preserved as a public service obligation and provided by appointed “suppliers of last resort” to ensure an uninterrupted energy supply to all customers. In this regard, the European Commission has requested that Member States submit reports detailing the purpose and price formation of these regulated tariffs.
While retail competition has already been established in several European energy markets, more EU countries have begun phasing out regulated electricity and gas tariffs, lately. Most recent examples include Romania, France, and Denmark during 2020-23, followed by Italy and Estonia in 2024. Notably, in Italy, the deregulation of the electricity and gas markets was completed in July 2024 with the abolition of the protected electricity tariff for domestic customers, following the removal of the protected gas tariff in January 2024.
Italian electricity consumers who did not choose an offer on the free market by the deadline, accounting for about 20% of the market, were transferred to the Gradual Protection Service. This service replaced the regulated tariff, which is now available only to vulnerable customers. It will serve as a transitional option for up to three years or until customers select a market offer. The contractual conditions and price structure of this service are determined by ARERA, with the price of electricity based on the wholesale price (PUN). Customers previously supplied under the protected service were assigned to a single supplier in each regional area through low-bid auctions. This reverse auction system resulted in lower protected service tariffs, however, the average electricity end-user price in Italy increased in July due to the rise in wholesale prices combined with the recent shift of customers towards free market offers.
Sources:
[1] European Commission: “Directive (EU) 2024/1711”
[2] REC NEWS: “Fine mercato tutelato luce e gas: cosa succede alle nostre bollette?”
[3] ARERA: ”Il Servizio a Tutele Graduali”