Bills: Risk of ridicule in transition to free market

Let’s start with the good news, or at least what seems like it. For the approximately 9 million families remaining in the protected market, the electricity bill drops by 10.8%, which will end (for those who are not vulnerable) on July 1, 2024. The energy, networks and environment regulator has announced new electricity tariffs that will come into force in the first quarter of this year: According to the details of the individual components in the bill, the final price for a typical family will be 28.29 euro cents versus 25.24 euro cents per kWh (kilowatt hour) including taxes. per kWh in the previous quarter. The change of -10.8% is largely linked to an overall decrease in energy expenditure of approximately -14%, including “regulated grid tariffs” (transportation and meter management, +2.1%) and overall system costs (+1.1%) ) is balanced with increases. ).

The December 2023 natural gas bill for a typical sheltered family also decreased by 6.7% compared to the previous month. The decrease is entirely due to the decrease in wholesale purchase expenditures of natural gas. Arera announced this in its latest tariff update for domestic customers who have not yet chosen the free market. The regulator for energy, networks and the environment notes that wholesale gas prices in December fell compared to November, with the price for customers in the protected market equal to 36.30 euros per megawatt hour.

Bills in 2024: Unknowns about expiring protections and cost estimates

But the drop in energy prices in 2024 alone will not be enough to ease the next round of electricity and gas bills: the drop will have a relatively small impact on the final bill, and some unknowns such as price volatility will weigh on this drop (to simplify, volatility measures the bill). extent of price changes and frequency of trips in a given time period), shipping costs, system fees and the end of tax deductions. Second, protections for gas and electricity markets will expire this year. Families who choose this option will have to switch to the free market by January 10 and July 1, 2024, respectively.

In other words, almost two years after Russia’s invasion of Ukraine, the energy crisis has largely subsided. However, the decline in raw material costs is not enough to turn the clock back to pre-covid values: bills remain high for various reasons related to the market, transportation and taxes. There is also the issue of the end of the protected market in 2024.

All things considered, 2024 promises to be the year of “heavy” bills for Italian families, according to a study conducted by the association of utility managers (Assium) together with the non-profit organization Consumerismo. According to the prediction of the research, an average family will spend at least 1,750 euros on electricity and natural gas this year. Assuming that offers and consumption are stable, the study estimates that the yield on bills will move to pre-pandemic values, estimating an increase of 650 euros compared to 2020. The maximum costs of bills are also decreasing, but are still higher than in 2020; equal to 3,900 euros per family, compared to 2,300 euros four years ago.

However, the study in question draws attention to the “cooling down” of bills compared to 2022. In the year when the energy price crisis reached its peak, maximum expenditure reached up to 6,500 euros per year. However, in 2022, some of the families had made savings by taking advantage of the 24-month tariff freeze before the start of the crisis. According to Luigi Gabriele, president of Consumerismo, “Electricity, gas, water and telephone account for a third of the family budget. With the end of protection measures, citizens are forced to go about their business on their own in the jungle of searching and visiting the homes of people to whom they propose incredible magic.”

Insult to natural gas bills: VAT returns to 22 percent

The risk of being ridiculed is real. Recently, the regulatory authority reminded that the abolition of general charges for gas and the reduction of VAT to 5% were approved for December (as for the whole of 2023), which will return to normal rates from January 2024. And here are the fine points. A new increase is coming: As of January 2024, VAT will return to 22% from last year’s 5%. The increase will eat up some of the savings due to the decline in energy prices. Consumer associations say that if the government does not renew the VAT reduction, which expires on December 31, “families will have a Caporetto.” A mini hit.

“The reduction in natural gas tariffs in December is undoubtedly positive, but below expectations. Given the downward trend in prices in international markets, a more significant decrease was certainly expected,” Assoutenti said. “In 2023, expenditures on energy supply in the protected market reached 2,197 euros per family: 889.60 euros for electricity, 1,307 euros for gas,” said Furio Truzzi, president of the association. Since January consumers will face a new ‘pain’ on gas: VAT discount on the invoice ends, tax increases from 5% to 22%: taking into account the December gas tariffs this is equivalent, only for VAT per unit per year approximately + 250 euro additional expense”.

“The reduction in tariffs launched in December will be completely canceled by the VAT increase in January, not to mention that in a few days the protected market will end, with all the relative unknowns of this transition,” Truzzi added. “There will be vulnerable gas users living in apartments with central heating systems who will be forced to switch to the free market despite having the requirements set by law to remain in the wider protection regime”.

Cost of electricity bill

What about light? According to a study by the National Consumer Union, if -10.8% for a typical protected family means spending 82.35 less on an annual basis, the total expenditure in 2024 still remains high, assuming prices are constant, reaching 681 euros. 1,467 gas means a total blow of over two thousand euros. If the electricity price decreases by 10.8 percent compared to the pre-crisis period, that is, January 2021, compared to the current period, and 52.5 percent compared to January 2023, the increase is still 25.8 percent.

Compared to the overall spend equal to 485 euros in 2020, you will now pay 196 euros more, i.e. +40.5%. Electricity prices also remain significantly higher than before the crisis, according to Assoutenti. “Prices on international markets are still extremely volatile and the risk is that there will be a new increase in tariffs in 2024,” Codacons said.