Italy adopts steps to lower power bills, energy producers complain

Italy approved measures to curb the impact of rising gas prices on power bills for households and ‌businesses, Prime Minister Giorgia Meloni said, drawing criticism from energy producers that will have to bear part of the burden. Sky-high energy prices are a major headache for the government, which faces mounting protests over the cost of living for ordinary people ahead of general elections due next year.

Under the scheme approved by ‌the cabinet on Monday, Italy will reimburse gas-fired power plants the difference between the price of gas at the TTF exchange and a ‌cap of €58.9 ($65.99), if positive. "High cost of energy is a structural problem which requires concrete decisions and the courage to tackle the mechanisms that fuel it, even when they affect powerful interests," Meloni said in a statement.

Italy is heavily dependent on natural gas, which is used to produce almost half of its electricity, the highest proportion in the European Union, data ⁠showed. Energy Minister ​Gilberto Pichetto Fratin said the measures would ⁠result in an average reduction of about €15 per megawatt-hour, without giving further details.

Climate change think tank ECCO criticised the move, saying it would only marginally lower household power bills, ⁠while keeping Italy locked in an energy system based on fossil fuels. The government recognises that it will take time for the package to deliver benefits.

Low gas storage ​levels in Europe and the disruptions caused by the Iran war pushed the benchmark Dutch front-month contract to a high over €104 per megawatt-hour (MWh) ⁠last month, before a retracement to around €82 MWh on Monday. The decree is expected to be mainly funded by an increase in system charges in power bills paid by some kind ⁠of ​households and companies.

Producers which are being forced to shoulder part of the funding needs are upset because the measures limit their ability to pass the burden to consumer bills. The scheme will run for 18 months starting from January and will be phased out gradually to avoid a ⁠cliff-edge effect when it expires.

Meloni added that Italian energy authority ARERA would introduce stricter rules against those who deliberately withhold generation capacity to drive up ⁠prices. The package also envisaged measures to ⁠ensure that lower cost of renewable energy translates into savings for households and businesses.

"We know this mechanism may upset those who have reaped very high profits from it, but our duty is to defend public interest," the ‌prime minister said. ($1 = 0.8926 ‌euros)