Aeegsi’s first Annual Report on energy and gas retail: a bit more competitive, though not enough yet

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On February 5th, the AEEGSI, the Italian Regulatory Authority for Electricity Gas and Water, has published Monitoraggio retail. Rapporto annuale 2012 e 2013, its first annual report on the energy and gas retail. The report fully complies with what established by the TIMR, Code on the monitoring systems about Energy and Gas retail (Testo integrato del sistema di monitoraggio dei mercati della vendita al dettaglio dell’energia elettrica e del gas naturale), adopted by the AEEGSI on November 3rd 2011 (Deliberazione ARG/com 151/11). The monitoring concerned a two-year period (2012-2013) of energy and gas retail sale towards household consumers, and non-household small consumers.

Evidence from the side of the offer, and about competition dynamics, reveals both variations and similarities between the two sectors. The main variation concerns companies’ territorial scope: the ones in the electricity sector are mainly national competitors, whereas the ones in the gas sector often act within regional or even local markets.

The main similarities deal with limited competition when it comes to household and smaller non domestic consumers: in both the electricity and the gas sector, the largest company holds a huge market share (respectively, about 75% and 77%), deriving from the so called “higher protection service” (servizio di maggior tutela), the protection system activated by the Authority after the market liberalization, in 2007, for those consumers who did not choose any company in the free market, thus providing them with average rates established by the AEEGSI itself.

Consumers also appear to meet some difficulties to switch from the higher protection service to liberalized offers, and, as the Report stresses, a point to be further investigated by the AEEGSI is the increasing percentage of failed attempts to switch from a service provider to another (about 12% in 2013), that calls for the necessity to make switching procedures simpler and more transparent. Nonetheless, an international comparison shows that switching rates in Italy are quite higher than in many other countries, thus envisaging some positive dynamism.

Finally, in both sectors, during the period taken into account, prices in the free market were on average a bit higher than those applied by the higher protection service.

The report also considers some experiences from abroad, where similar liberalizing processes are occurring. As it emerges, the main trend is to graduate degrees of consumers’ protection towards fully liberalized markets, besides the establishment of price ceilings, which is known as “safety net” (as is the case in the Netherlands), to avoid unfair prices by free market competitors.

Of great interest is the chapter devoted to AEEGSI’s possible lines of action, which the Authority developed drawing from the monitoring evidence, and that represents the evaluating activity’s very outcome and goal. In a nutshell, Aeegsi resolves to keep the current protection system, in order to help little and domestic consumers to join the free market without facing dangerous price variations, that may facilitate companies’ gambling activities.

(Federica Cacciatore)

Credits photo: Ondablv