(Finance) – “All this tussle over the transition from the protected market to the free marketwhere I accuse both politics and the press, is leaving me quite stunned and even a little indignant, because as a citizen – knowing the subject – I feel very mocked, especially by all these attacks without even a single piece of data”. he says to Finance Diego Pellegrino, spokesperson for ARTE (Association of Energy Resellers and Traders), adding that the controversies are “undermining the reputation of an entire sectorbecause we free market operators are demonized.”
The issue is that of the transition from protection services, which are electricity and gas supply services at economic and contractual conditions established by the Regulatory Authority for Energy, Networks and the Environment (ARERA), to a contract from the free market. For the gasfrom January 2024, domestic customers who are not vulnerable (due to age, economic difficulties or disabilities) will have to move to the free market, choosing whether to stay with the same seller (but with a different offer) or turn to other sellers. For electricity micro-businesses the enhanced protection service ended in April 2023 (for small businesses it had already ended in 2021) and for non-vulnerable domestic customers of electric energy will end starting from April 2024.
Domestic customers in the electricity sector served on the free market went from approximately 49.4% in 2019 to 71% in June 2023 (78.5% of the energy supplied), and despite a certain lack of homogeneity across the national territory in most regions and in the Italian provinces over 60% of customers have left the relevant protection regime, ARERA reports. Even though it has gradually reduced over the years, the current consistency of the enhanced protection service is still significant, with over 9 and a half million of domestic customers supplied, of which approx 4 and a half million vulnerable.
According to Pellegrino, misunderstandings are also being created about the terms used: “La The word protection market is the biggest mistake made from a communication point of view. It should have been called supply of last resort and so I bet that today these almost 10 million who still have to make the switch would not have been there. The reality is that it is a service of last resort, that is, an administered and unprotected tariff, because everyone associates the word protection with the idea of a fixed, firm tariff that guarantees protection, while we are talking about a tariff that exactly follows market trends. The paradox is that it is a tariff built thanks to the law of supply and demand on the free market.”
The ARTE spokesperson also criticizes the consumer associationswhich “are making huge mistakes“. “Speaking of protection, we saw that in July, August and September it was deliberately kept a little lower than the market, but we must not forget that it will be equalized later, in fact in January we expect it will be super-equalised because they have to recover six months. And therefore by assuming different behaviors between people, a subsidy is potentially made between a winter consumer and a summer consumer, to the advantage of the latter”, she explains.
Pellegrino invites to caution and tranquility, also because the transition will not be a revolution – and this is demonstrated by the fact that many have already done so – and because in any case there are advantageous offers on the market, and invites you to go to the Offer Portal (managed by the Single Buyer on ARERA provisions) or on the websites of the various companies – perhaps the supplier closest to home and that you know – to look for the solution best suited to your needs. Remembering that in any case the right of withdrawal exists and inviting us to be careful when comparing the numbers, which “can be interpreted as we wish” and refer to “two non-comparable markets, which move differently and in the end, however, reappear“.
Some data on prices ARERA provided them in a recent hearing at the Chamber of Deputies. As regards the electricity sector, in 2019 and 2020, before the heavy decrease in consumption due to Covid and the price surges recorded in 2022, the average total price of the enhanced protection service net of taxes was approximately 13% and 24% lower respectively than the average price charged on the market free; otherwise, in 2022, the free market presented values significantly lower than the enhanced protection service (-30%). This is largely explained by the predominance of fixed-price contracts in the free market, which contained the effects of the enormous price increases in wholesale markets. From the preliminary data of average turnover of first half of 2023the price advantage of the free market compared to the protected market seems to persist in the electricity sector, while Arera states that “probably”, during the second half of 2023 the reversal of this differential between the free and protected market which could become positive again, with costs higher for the consumer.
The passage of the next few months will also change the relationship between companies and customers, according to the expert. “This is the time for the market to open, a a moment that operators have been waiting for for years, also to change the relationship with customers – says Pellegrino – Today when we go to a customer to sign a contract and, for example, there are rising forecasts for the price of energy, we could propose a fixed price and hear a response with a comparison with respect to protection. But it is impossible to compare a fixed price with protection, because you can only do it after 12 months.”
Furthermore, “it should be underlined that a fixed price is not made for a question of savings, but for a question of protection, because you want to feel comfortable even if prices rise, perhaps knowing that you can’t afford to pay more than a certain amount – he adds – It’s a philosophical choice, not a price one. So we are waiting for this moment, but precisely because it was also difficult to explain these things to customers, now everything will be easier. You have a price at a given moment which is the one on the free market and so I can tell you how much less I will pay you in relation to this, while in relation to protection you cannot do so because it is a tariff forecast”.
Another theme is that of relationships between operators in the sector. ARERA observes that the retail market, if on the demand side is still characterized by a significant share of customers who have not chosen a supplier on the free market, on the supply side it presents a high degree of concentrationas demonstrated by the market share of the first operator (Is in the) which, with over 16 million small electricity and gas customers, is far superior to any other market operator. In particular, according to data updated to June 2023, out of a total of 648 electricity sellers registered in the list and 529 natural gas sellers, the second operator (Eni) supplies approximately half of the former’s customers and only 2 other operators (A2A And Hera) exceed the overall threshold of 2 million customers served.
“There is a general theme of the functioning of the market and this is somewhat regardless of whether protection is open or not – states Pellegrino – The operators that ARTE represents, the SMEs in the sectorthey are the ones who they have more difficulty operating in a capital intensive market, where you find yourself having to advance four months of cash and where the financial burden is completely cutting us off. Even considering that we don’t have many tools to protect ourselves from those who don’t pay, because we are a country that functions poorly from the point of view of credit recovery.”
This scenario may be worsened by the controversy over the transition from the protected market to the free market, the expert underlines: “One Burnt reputation compromises your access to finance, because either we don’t get credit or we pay twice as much as others. And all these discussions at this moment, all this is causing damage to an entire sector, made up of private companies that support the economy, many people who work there, a crazy related industry that is behind it.”
“Our companies which are smaller have greater supply difficulties on the finance front, however large groups – which are also state companies like Eni and Enel, which among other things do a wonderful job and should be looked at as an example – it is logical that they have a completely different access to finance“, concludes Pellegrino.