Utility Bills Decree: what the agreement signed by the Government at the European Council entails

The government has taken its first political step regarding the Utility Bills Decree following a broad agreement with the European Commission on a revised and amended version of the ‘Iberian model’, a measure already trialled by Spain and Portugal to curb electricity prices by mitigating, at source, through a temporary price cap mechanism, the impact of natural gas prices used in thermal power generation.

The conclusion of this process, announced yesterday by Palazzo Chigi, comes ‘following intensive and constructive discussions between the Commission and the Italian authorities’, who will now have to redraft the former Article 6 of the Decree-Law. The structure of the new measure will, as mentioned, follow the model of the ‘Spanish mole’, now adapted in light of the Middle East Crisis Temporary State Aid Framework (METSAF), the temporary framework on state aid introduced by the European Commission to mitigate ongoing geopolitical and market tensions. The revised mechanism will then have to align with the guidelines from Brussels, reiterated yesterday by a Commission spokesperson: ‘The measure will be temporary and designed to minimise distortions in the EU electricity market and to preserve incentives for long-term investment in clean energy. It will exclusively compensate for the rise in gas costs and will not cover the costs of the ETS (which, however, were included in the previous wording blocked by Brussels, ed.), whilst ensuring that the benefits are passed on in full to end consumers. Furthermore, only those consumers who benefit from the measure will contribute to its funding’.

Specific conditions which will need to be incorporated into the final draft of the mechanism. The government expects to notify this within a few weeks once the technical compromise has also been finalised: the government’s aim is to set this cap at around 60 euros per megawatt-hour for at least one year. The final decision will be known following the second phase of discussions and, once approval for the revised proposal has been secured, a new decree and a further step in the Council of Ministers will be required.

On the government front the outcome of the preliminary talks has been welcomed, although attention remains focused on formalising the agreement. The Minister for the Environment and Energy Security, Gilberto Pichetto Fratin, expressed his satisfaction at “an important first step that allows us to move forward towards containing energy costs and supporting the competitiveness of the manufacturing sector”.

Along the same lines, Deputy Minister Vannia Gava, who has been at the forefront of the negotiations, emphasised that the initial positive results ‘confirm the government’s determination to reduce the burden of energy costs on households and businesses without compromising the country’s industrial resilience’.