Fasten your seat belts and prepare for take off. This is what the approximately 30 million electricity consumers will have to do from 1 January 2017. In fact, many new features are on the way, and we will discover them with the next imminent quarterly update of the tariffs that the Energy Authority will announce on Thursday 29 December. Two main innovations await us with the new year: the new "similar protection" web contract, a contract with a discount that will allow those who have not yet done so to experience the free market by choosing their electricity supplier as well as today he already chooses the telephone operator; the remodulation of tariffs for domestic customers with the revision of the network component. What will it bring? There will be an increase in bills but it won't be for everyone. In fact, the main beneficiaries of the new system will be households that exceed 2.700 kilowatt hours per year, corresponding to the consumption threshold of a typical Italian family with a 3 kilowatt power meter.
NEW BILLS AND INCREASES BUT NOT FOR EVERYONE
As the Authority explains: “from 1 January 2017 some conditions of the enhanced protection service change, which will always be reserved for families and small businesses (with less than 50 employees and an annual turnover not exceeding 10 million euros). Compared to today, from 1 January 2017: the price will always be calculated quarterly; however the method used will be characterized by a more immediate alignment with the procurement costs incurred to serve customers; the other contractual conditions will not undergo variations”.
What does it mean? First of all, we must know that about half of the bill is due to transport and distribution costs and to system "collateral" charges (for example, incentives for renewables, charges for the dismantling of nuclear power plants, etc.). The remaining 50% is due to the cost of the raw material (gas, fuel oil, coal) used to produce electricity. Until 2015, both of these items on the bill were highly progressive: low consumption was paid at a price level that did not fully cover the cost; at high levels, however, the price rose exponentially, much higher than the cost. In extremely simple words, it means that the higher consumers paid more than they should to support the lower consumers. It is a mechanism conceived in the 70s, those of the first oil shocks when the increase in consumption was discouraged but which today, with the advent of renewables and with the shift of many consumptions from gas (or more generally from fossils) towards the electricity sector it no longer holds.
From 1 January 2017, therefore, the bill changes and the progressiveness of the price changes. Everyone will pay the same fixed amount for energy transport and meter management. The first intervention will also be carried out on the tariff for system charges, in order to reduce the progressive effect and limit the number of annual consumption brackets to 2; then all the innovations related to the power commitment are triggered (today we can choose between a 3 kw meter, the one powered by 3,5 and the one with 6 kw). Starting January 1, there will be more tiers to choose from.
Finally, from 1 January 2018, the reform will become fully operational, applying the full non-progressive structure also to the tariff for system charges (they represent around 40% of the final bill).
WHO GAINS AND WHO LOSES
There is no doubt: with the new system, the cost of the fixed portion of the bill will increase. And the fixed fee accounts for about 22% of the costs of the typical family with a 3 kW meter and average annual consumption of 2.700 kilowatt hours; the incidence increases (about 37%) on lower consumption (1.500 kilowatt hours/year) and decreases on high consumption: around 15% for consumption of 6.000 kilowatt hours per year and a 6 kw meter. In summary, the bill will increase for singles or low-consumption families; and it will lighten for families with high consumption: large ones, with at least 4 members; and the more affluent ones, who consume more because they use more appliances or because they have opted for electricity to heat-cool the house, for example.
Is the new system a reverse Robin Hood that rewards the rich and penalizes the less well off? It cannot be said a priori. First, the burden of bill rebalancing will fall more on second homes and be lighter on first homes. Secondly, there is provision for families in need social bonus, i.e. a reimbursement capable of completely offsetting the higher cost of the reform and which must be requested from the Authority. Today there are still few who do it (just over a million families out of a potential catchment area of almost 3 million). Thirdly, so far it has been large families (and for this reason with higher consumption) who have subsidized those with fewer family members, regardless of income. Fourthly, household consumption patterns are changing and energy efficiency is slowly, and opportunely, leading to a reduction in electricity consumption detached from the improvement in the economic condition of households linked to the, albeit modest, growth in GDP.
The combination of all these factors made it necessary to review the tariffs, which are more related to costs, also to prepare for the next stage, i.e. that of a fully free and more competitive market which should start, if the Competition Law is ever approved, from mid 2018.
HERE COMES THE SIMILAR PROTECTION
Precisely to facilitate the transition to the free market, the Authority has provided for the new contract: it's called Similar Protection since it follows the enhanced protection contracts, those currently used by over 60% of Italian families and about half of small businesses. It will be available from 1 January 2017 on the Acquirente Unico website. In practice, it is an online contract only for electricity whose methods are defined by the Authority and are the same for all suppliers (Enel, Acea, A2A, Edison, Hera, etc.) but, and this is the novelty, each of them will be able to offer a bonus, i.e. an extra discount, to capture the customer. The contract will have a maximum duration of 12 months and then the consumer will be able to switch on his own to the free market or keep the supplier already selected.
