The free energy market: dynamics and prospects

(Il Sole 24 Ore Radiocor) - As of 1 July 2024, the complete transition to the free energy market has taken place, excluding only so-called 'vulnerable' customers. This has already happened for the gas market, as of January 2024. A transition that has caused not a few difficulties for the customers involved and not a few controversies, especially on the price front. Many have pointed the finger, asserting that this transition has led to a rise in energy prices. In reality, the situation seems to be very different. Starting from an analysis of the latest data from the Arera (+12% electricity bill in the next quarter for vulnerable customers; while on an annual basis there is a 41% drop), we took stock of the situation with Andrea Cavallini, managing director of A2A Energia, to understand what the advantages and criticalities of the free market are. "As the Arera report also shows, there has been no increase in average end prices for domestic customers. The price of the greater protection is in fact 316 euros per Megawatt hour, while that of the free market is 316.2," the manager explained; while the trend of slowing consumption continues for both electricity and gas.

In general, the report portrays a very clear evolution of the sector from the point of view of how the price structure changes, because with the advent of renewables there is - as expected - a variation in the cost of energy at different times of the day. This is an important dynamic and should be understood by customers because it affects long-established consumption habits, such as the use of appliances in the evening.

They are dropping significantly. There is a reduction in both electricity and especially gas consumption, the latter dropping compared to last year by 16%, to 43 billion cubic metres. When the Russian-Ukrainian crisis began, consumption was at 60 bcm. This is a sign that companies and households have started to adopt a conscious and rational use of the energy component, as much for cost as for environmental reasons. The trend continues and is very evident. As A2A, the Report shows that we have consolidated our position as the second largest national operator in electricity by quantity sold and we are in fourth place in gas. I believe that customers have rewarded what we have done during the energy crisis: we have honoured all our contracts and maintained the clarity and transparency that have always characterised us.

I think there are three elements that should be emphasised. The first is that, as Arera's report shows,there has been no price increase: the average final price to domestic customers in the greater protection market is 316 euros per megawatt hour, that of the free market is 316.2. The second point is the tendency to compare these figures, which in my opinion does not make sense: protected and free are two different markets, one characterised by prices that vary according to the trend in the cost of energy, and the other by offers that often have a fixed price that is stable for 12 or 24 months. To draw a parallel, it is as if one were to evaluate ex ante a fixed-rate mortgage and a variable-rate mortgage, the evolution of which will depend precisely on the trend in rates. As far as energy is concerned, if you choose a fixed-price offer today you are buying a guarantee that this will not change in the future. If the cost of energy were to rise even a great deal, as it did in 2022, this guarantee would shelter customers: in that very year, if there had been no fixed-price contracts thanks to the free market, Italians would have paid 5 billion euros more. Finally, the offers of the free competition market are structured differently because they include, for example, territorial services or customer desks; they almost always include (again in the case of A2A Energia) the supply of green energy produced from renewable sources; they may propose additional products or services, such as boiler insurance, which the user may or may not choose.

I believe that the move to graduated protections for non-vulnerable domestic customers has created some confusion. I am mainly referring to the prices that have formed in the dedicated auctions, which are particularly low. As of today, the paradox is that the so-called vulnerable customers, who are still served under conditions defined by the sector authority, will most likely have less favourable conditions than those enjoyed by customers assigned to operators through auctions. We are waiting for the decisions that the Authority and the government will take regarding vulnerable customers, the current assumption is that there will be new auctions in 2025, but I believe that competitive prices similar to those of previous auctions cannot be expected. We had a very rational attitude, we submitted a sustainable offer and in the auctions for the Gradual Protection Service for non-vulnerable domestic customers we won two lots in the south.