Making the Energy Union work for consumers Guido Bortoni - - PowerPoint PPT Presentation

Making the Energy Union work for consumers Guido Bortoni - President Italian Regulatory Authority for Electricity Gas and Water CERRE Executive Seminar Brussels, 15 October 2015

Electricity bill of a typical Italian family (3kW – 2.700 kWh/y) €/Y + metering Total = 448 €/y + tax = 508 €/y Under Market reform value 1

Retail markets development: scenario to come Risk hedging: • increased number of price structures offered Retailers’ price-cost margin: • the energy component of the retail price close to the forward value of electricity on wholesale markets • ...plus efficient operation costs • convergence of price-cost margins across EU? Retail markets structure: • reduction of incumbents’ market shares • high number of retailers, including foreign companies (licensing needed) Proactive consumers and elastic demand: • optimal switching and searching behavior • Demand elasticity 3 Additional advanced services:

Retail markets development: actual scenario High price - cost margins • Not only UK. • Germany, Austria, Ireland Low switching rates (above 10% best practice) • Even in countries with high saving potentials Switching mistakes are common among customers Very low trust Highly concentrated markets • In many countries the market share of the 3 largest suppliers is above 70% 4

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Regulatory actions The regulator has launched an organic reform of the regulation of electricity and gas mass retail markets. This reform aims at: � promoting competition � empowering customer The reform will focus not only on the price regulation of the default and last resort services, but also on: • Data and information management to support a more efficient and accountable switching process (Integrated Information System) • Metering (looking forward to 2G smart metering campaign) • Bill transparency – to be understood by clients • Distribution tariff structure – cost reflectivity, no subsidies • Energy footprint • Fuel poverty measures – social bonus 6

Reform of the Maggior Tutela (MT) service Today: Maggior Tutela (MT) = default supply and last resort supply � � Decision to reform the MT service (provision 271/2015/R/com) � Consultation document 421/2015/R/EEL: first phase electricity market for small businesses thereafter households � Legislative initiative to abolish the price regulation of the default service (both electricity and gas) by 2018 After abolition, Mt is going to be only last resort supply without price control (temporary � service at reasonable price) 7 25/06/2014

Today: Maggior Tutela (MT) = default supply and last resort supply Decision to reform the MT service (provision 271/2015/R/com) Consultation document 421/2015/R/EEL: first phase electricity market for small business household Legislative initiative to abolish the price regulation of the MT non household BT non household 2012 2013 2012 2013 2012 2013 default service (both electricity and gas) by 2018 Free market MT Last resort 8

Switching rates households and small businesses Kind of switching LV non - households households 2012 2013 2012 2013 Within free market 7,4% 10,2% 3,4% 4,8% From and to MT 4,5% 5,3% 5,1% 5,6% 3,3% 4,2% 4,4% 4,9% of which: exit 1,5% 0,5% 2,2% 2,9% of which: within integrated group 1,2% 1,1% 0,7% 0,7% of which: switch back From and to last resort 0,6% 0,5% - - Total switchings 12,4% 16,0% 8,5% 10,4% Data: Aeegsi – Retail Report 9

Market concentration Free market National Concentration Indexes households LV non - households MV non - households 2012 2013 2012 2013 2012 2013 Energy HHI 2.849 2.810 956 920 371 364 C1 50,2% 49,8% 27,2% 26,9% 9,3% 9,5% C2 62,0% 63,0% 33,4% 33,0% 17,6 % 18,4% C3 72,8% 72,4% 39,4% 37,8% 22,8% 23,3% BUT: high number of small retailers (more than 381 active in the mass market) 10

Tutela Simile Opzione 2A 11

Tutela Simile 12 25/06/2014

Thank you for your attention! Guido Bortoni presidenza@autorita.energia.it 13