On 30 July 2026, under Resolution 279/2026/S/eel, ARERA imposed a fine of €5 million on a leading operator – the maximum penalty provided for under the current Italian regulatory framework for wholesale market manipulation, which is prohibited by the European REMIT Regulation. The case concerns combined-cycle gas-fired power stations and pipeline operations carried out during a single month in 2022: it does not involve plants powered by renewable sources and predates the 2023–24 period, which was the subject of the fact-finding investigation published by ARERA in 2025 (Resolution 302/2025/R/eel; for an analysis, see our published work here), which has not yet been followed by any sanction proceedings – although the Chair of ARERA, on the sidelines of the September hearings, stated that “several” cases are currently under review.
Unlike the fact-finding investigation, the sanctioning procedure requires a hearing with the operator and an assessment of the operator’s justifications. This is the key distinction between the suspicions that emerged during the general investigation and the Authority’s first sanctioning decision concerning the
economic withholding of capacity.
The economic withholding mechanism does not require a power station to be shut down or taken off the grid, as is the case with physical curtailment. On the day-ahead market, where electricity for the following day is traded, bids are ranked in ascending order of price and accepted in accordance with the auction rules and system constraints. If a plant bids at an excessive price, its bid may be rejected. Other units are then used to meet demand. The problem arises when price formation is distorted by the exclusion of usable capacity, achieved through bids lacking adequate economic justification, even though the price offered is profitable in relation to the company’s variable costs.
The decision sets out a number of key principles, which are also of significant importance for the European debate. To establish market manipulation under the REMIT Regulation, it is not necessary to prove an intention to distort the market: what matters is the conduct itself and its ability to set artificial prices. The freedom to make offers does not exempt one from the obligation to respect market integrity. Nor can the need to recoup fixed costs, in itself, justify strategies that distort the normal interplay between supply and demand.
ARERA also rejected the reference to criteria developed for the German market. The reasoning highlights the difference between a system in which remuneration depends exclusively on the energy market and the Italian system, in which the capacity market provides payments for the availability of capacity. The comparison must therefore take account of these different incentives and obligations: a valid justification in one particular framework cannot be automatically transferred to the other.
The key technical point concerns opportunity cost. An operator may justify a bid by considering a more profitable alternative use, but must demonstrate that this alternative was in fact assessed at the time the decision was taken. In the case under consideration, the company claimed to have generated revenue from the dispatching services market. According to ARERA, however, a retrospective analysis cannot explain a decision that had already been taken.
Nor does the fact that other operators may have engaged in similar conduct preclude liability. The Authority distinguishes between establishing the infringement and quantifying its effects, and consequently between establishing the infringement and determining the penalty. Furthermore, for the purposes of assessing the gravity of the infringement, the key factor is the impact on prices and consumers, not merely the additional profit realised by the undertaking. The rise in the market price may, in fact, affect volumes far greater than those directly sold by the operator concerned. A particularly important passage in the decision states that “in order to grasp the actual gravity of the type of infringement at issue in these proceedings, it is not sufficient to refer solely to the undue advantages obtained by the company (which do not even constitute an essential element of the offence), as the impact of the conduct on market prices – which translates into potential harm to consumers – is of paramount importance.”
There remains an issue of transparency in this regard. The 45-page penalty decision contains 150 omissions. ARERA first sets out the company’s defence in detail and then presents the arguments with which it refutes them. The Authority’s reasoning is therefore fully comprehensible, but the data necessary to understand certain essential elements of the manipulation is missing, in particular the estimated potential damage to the market – information which, as such, can hardly be classified as falling within the parameters to be kept confidential in order to protect the company’s commercial and industrial interests.
The statutory maximum fine of €5 million for market manipulation offences, set by a law of 2014, also raises questions about its actual deterrent effect on large market participants, given that this maximum level (applied in this case) is not linked to the company’s turnover, which in this specific instance stands at €8.7 billion. However, in the absence of public data on the harm caused to consumers, it is impossible to make a comprehensive assessment.
The matter remains unresolved: the penalty decision is enforceable, but the company against which the penalty was imposed has announced that it will appeal to the Lombardy Regional Administrative Court. Meanwhile, under Resolution 272/2026, ARERA has launched a general procedure, due to conclude on 31 December 2028, aimed at adopting regulatory measures concerning “integrated” supervision. ARERA also intends to consider “possible ex ante measures to mitigate market power in the formulation of offers.” As part of the same proceedings, ARERA has also included the findings of the fact-finding investigation covering the two-year period 2023–24 and has provided for “the extension [of the investigations] to more recent periods,” a sign that the matter is far from settled, as recent parliamentary questions also demonstrate.
Restoring confidence in the integrity of the wholesale market is a decisive objective, as well as the ultimate aim of the REMIT Regulation. While the fact-finding investigation had highlighted the existence of a problem, the first penalty for the economic withholding of capacity has demonstrated how this can be established. Will it now be up to the national administrative courts to deliver a final ruling, or will the matter be referred to the Court of Justice of the European Union?
* Carlo Cambini (Full Professor of Applied Economics, Turin Polytechnic) and Luca Lo Schiavo (Senior Regulatory Specialist at ERRA – Energy Regulators Regional Association)
English version by the Translation Service of Withub
