Today, the average price of electricity on the spot market in Italy stands at between €240 and €280 per megawatt-hour; while this is not among the highest in Europe, it is still higher than the prices recorded in France, Spain and the Scandinavian countries (see figure).
The government announced that it has reached an agreement with the European Commission on the energy bills decree. The effects of this measure are unclear, but some assessments have emerged. Even after accounting for the cost of the subsidy, all consumers would benefit, says the Government. But how much do they actually gain? And above all: are we sure that the “net” gain actually reaches its intended recipients?
Firstly, the stated reduction of twenty euros per megawatt-hour in the electricity market does not translate into a saving of twenty euros on electricity bills. The new decree aims to lower prices by subsidising gas-fired power stations, but consumers themselves would ultimately bear the cost of this measure. The actual outcome will depend on how much remains after funding the subsidies, accounting for the effects on international trade and verifying that producers have genuinely reduced their bids. This is where the Government’s promises come up against the mechanism’s limitations. Let’s take it step by step.
The Italian model is based on the “Iberian exception”, introduced in Spain and Portugal in 2022. A conventional cap is set on the price of gas used to formulate bids from thermoelectric power plants. The GSE reimburses producers for the difference between the reference gas price and the cap, based on the volumes consumed to generate electricity. Power stations must pass on the full benefit in their bids: their costs are reduced and, as a result, the wholesale price of electricity should fall.
The subsidy, however, is not free. Congestion revenues—that is, the proceeds from electricity interconnection trading —would finance part of it. The remainder would be recouped through a charge included in the dispatching cost, which end consumers would pay via their electricity bills. On the one hand, therefore, the price of energy falls; on the other, a cost increases. The benefit to the consumer is merely the difference between these two changes, not the full reduction announced on the wholesale market.
Who pays is the first point of contention. In consultation 222/2026, ARERA proposes spreading the cost across all end customers, including those with fixed-price contracts or long-term purchase agreements (PPAs). These customers do not immediately receive the direct benefit of the fall in the wholesale price, but would nevertheless contribute to the subsidy. The Authority highlights indirect benefits, including lower energy release charges and potential savings on balancing costs. It remains to be seen whether these are sufficient to justify a contribution equal to that of those who benefit fully from the measure.
Spain adopted a different approach: existing fixed-term contracts were gradually brought into the scheme upon renewal, price review or extension. According to a study by the Oxford Institute for Energy Studies (Robinson and others, 2023), in the first hundred days this accounted for 59 per cent of Spanish demand and 35 per cent of Portuguese demand. This approach protected those who did not immediately receive the benefit, but concentrated the cost on a smaller group. The maths is simple: for the same total expenditure, if half of consumption is covered, the per-megawatt-hour contribution doubles.
However, the Italian situation differs structurally from that of Spain: there are around 10 GW of interconnections with neighbouring countries. Italy imports a significant proportion of its electricity. If the domestic price falls, selling electricity in Italy becomes less profitable and imports decline. To replace some of these imports, Italian gas-fired power stations must increase their output, which drives up fuel demand and puts pressure on fuel prices. ICIS estimates a rise in gas prices of around 0.7 euro/MWh. At the same time, revenue from interconnections – the very source intended to finance part of the support – falls.
How much, then, will be left for consumers? The available figures require us to distinguish between the different versions of the measure. The initial technical report on the previous proposal to neutralise CO₂ costs indicated a net benefit of around 9 euros/MWh; for a household with an annual consumption of 2 MWh, this amounts to around 18 euros a year. This figure relates to a previous mechanism and is not a forecast that can be automatically applied to the new proposal.
Regarding the new gas price cap, Timera’s October 2026 study estimates an average fall in the wholesale electricity price of around 20 euros/MWh in 2027, concentrated mainly in the first quarter. The simulation assumes a difference of around 48 euros/MWh between the TTF gas price and the cap in January. However, only a fraction of the fall in electricity prices would be passed on to customers: the rest would be absorbed by the cost of funding the measures, lower revenues from interconnectors and other market effects.
This redistribution also affects producers. Timera forecasts an improvement in margins for gas-fired power stations, driven by reduced competitive pressure from imports. At the same time, the average price achieved by solar power stations is expected to fall by around 16 euros/MWh in 2027. The risk is that this could prop up fossil fuel generation and reduce the profitability of renewables, making new investments less viable. The immediate savings must therefore be assessed alongside the effects on the energy transition.
Then there is the issue of checks. Under the proposal, the GSE makes payments based on certified gas consumption; verification that the producer reduced its bids takes place afterwards. Payment is therefore not conditional upon prior verification that the full transfer has taken place. An operator might be tempted to collect the aid and reduce supply by less than required, relying on the complexity of the checks and the time it takes to impose sanctions. This is an incentive risk, not proof that such behaviour will occur.
The proposed system provides for a monthly first-level check, followed by an assessment by ARERA and, if necessary, a formal investigation. A considerable amount of time may therefore elapse between the payment and any penalty. The experience in Spain, where the cited sources do not reveal any public cases of fines for failure to transfer, does not permit automatic conclusions about Italy. Competition between power stations and the credibility of the regulatory authority remain decisive: a legal obligation only yields results if it is complied with and enforced.
A further difficulty concerns supply contracts. The reimbursement is based on a standardised gas price, not on the actual cost of each power station. A producer with a more favourable long-term contract may receive the same support as someone buying on the spot market, while maintaining different profit margins. However, the assessment must also take opportunity cost into account: if the gas can be resold, the market price remains economically relevant. Clear criteria are needed to distinguish between legitimate differences and the failure to pass on the subsidy. Eurelectric, too, in its 27 October letter, challenged gas price caps in highly interconnected markets and proposed temporary, targeted support for consumers.
Any assessment of the decree must, in any case, be based on the net result on the bill. Administrative costs, the distribution of charges and the quality of checks will be the real litmus test of the measure.
* Carlo Cambini – Full Professor of Applied Economics, Turin Polytechnic
* Luca Lo Schiavo – Senior Regulatory Specialist at ERRA -Energy Regulators Regional Association
English version by the Translation Service of Withub
