Italy: New Legislation Liberalizes Domestic Electricity Market

italy:-new-legislation-liberalizes-domestic-electricity-market

On December 26, 2021, Legislative Decree No. 210 (L.D. No. 210) entered into effect in Italy, liberalizing the domestic electricity market and implementing EU Directive 2019/944 on common rules for the internal market for electricity.

General Organizational Principles of the Electricity Market

This sweeping legislation governing the Italian electricity market lists the principles under which this market is to be organized. (L.D. No. 210, art. 1(1).)

Contractual Rights of Final Customers

Under the new legislation, final customers may purchase electricity from one or more producers or suppliers of their choice, even if these are located in another European Union (EU) member state. (Art. 5(1).) Final customers must receive a summary, written in simple and concise language, of their contractual rights, in particular concerning prices and tariffs applied. (Art. 5(4) & (7).) L.D. No. 210 imposes stringent obligations for electricity suppliers to provide, free of charge, accurate, easily understandable, clear, concise, and easy-to-consult billing information to their final customers. (Art. 6(1) & (2).) Final customers also have the right to change their suppliers, without discrimination related to costs, charges, or times. (Art. 7(1).)

Contracts with Dynamic Prices

Final customers who have a smart electricity meter may enter into contracts for dynamic electricity prices with each supplier that has more than 200,000 final customers. (Art. 8(1).) The supply contract with dynamic price is based on the actual consumption data of the customer, as detected by the intelligent metering system. (Art. 8(2).) These systems must accurately record the actual time of electricity use, ensuring the consistency of measurement methods used to measure the electricity fed into the network and taken from the network. (Art. 9(1)(a).) Such methodology must comply with applicable EU legislation. (Art. 9(1)(b).)

The Italian Regulatory Authority for Energy, Networks and Environment (Autorità di Regolazione per Energia Reti e Ambiente, ARERA) is to monitor for 10 years contracts with dynamic electricity prices, detecting any risks that might exist affecting final customer bills and price volatility. (Art. 8(4).)

Final customers who do not yet have smart meters may still use individual conventional meters that can accurately measure their actual consumption, either directly or via an online interface or other suitable interface. (Art. 9(6).)

Vulnerable Electricity Customers

Special guarantees are established for vulnerable and poor electricity customers, in particular those with serious health conditions that require the use of medical-therapeutic equipment powered by electricity necessary for their life support, as well as those in smaller, non-interconnected localities or in emergency housing structures affected by natural disasters, and those over 75 years of age. (Art. 11(1)(b), (d), (e), (f).)

To aid these customers, the decree contemplates the creation of the National Observatory of Energy Poverty with the purpose or fighting energy poverty at several government levels. (Art. 11(5), (6)(a).)

Contracts for Aggregation and Management of Electricity Demand

Customers may purchase and sell all services connected to the electricity market other than supply and enter into aggregation contracts, regardless of their existing energy supply contracts and by contracting with electrical companies of their choice. (Art. 12(1).)

Further Liberalization of the Domestic Electricity Market

In accordance with L.D. No. 210, a gradual transition is to occur from the current wholesale electricity market, in which a single national price is applied to final customers, to the application of zonal prices defined on the basis of market needs, favoring the transparency of the markets. (Art. 13(1).)

Additionally, active customers have the right to sell self-produced electricity on the market by entering into agreements for the purchase of electricity. (Art. 14(2)(b).) The community can also participate in the areas constituted by the generation, distribution, supply, consumption, aggregation, or storage of electricity or the provision of energy efficiency services, electric vehicle recharging services, or other energy services. (Art. 14(6)(c).)

The sharing of the electricity eventually produced by energy communities can take place through the existing distribution network and also through lease or purchase contracts of portions of the same network or newly built networks. (Art. 14(10).)

Tariffs established in accordance with the above or the methodologies for their calculation must be previously approved by ARERA. (Art. 15(2).)

Closed distribution systems can also be created for the distribution of electricity to industrial, commercial, or shared service consumption units located within a geographic area. (Art. 17(1).)