Managing the Liberalization of Italy’s Retail Electricity Market: A Policy Proposal

26 Pages Posted: 6 Dec 2018

See all articles by Carlo Stagnaro

Carlo Stagnaro

Bruno Leoni Institute

Carlo Amenta

University of Palermo - d/SEAS

Giulia Di Croce

Independent

Luciano Lavecchia

Bank of Italy

Date Written: September 2018

Abstract

Italy will phase electricity retail price regulation by July 1st, 2020. This is the last step in the process of electricity market liberalization, that started in 1999. Until then, residential customers and small businesses who do not choose their supplier, will be supplied under a transitional, regulated service named “maggior tutela” (greater protection), which is supplied by the local distributor at a price set by the regulator. This paper reviews the literature on electricity retail competition – with particular regard to its expected effects on prices, innovation and customer engagement – and the condition under which its benefits may be delivered. Then a Structure-Conduct-Performance analysis of Italy’s retail electricity market for residential customers is performed. Two issues are found to be potentially problematic: excessive market concentration and low customer engagement. Energy poverty is also identified as an issue to be addressed. A phase-out mechanism is finally proposed, that relies on graduality, asymmetric regulation and a mandatory, opt-out collective switching exercise. The mechanism aims to rapidly reducing market concentration by leveraging on behavioral incentives to customers still under regulated prices to switch to the cheapest supplier.

Keywords: Electricity, Competition, Retail Market, Regulation, Energy poverty

Suggested Citation

Stagnaro, Carlo and Amenta, Carlo and Di Croce, Giulia and Lavecchia, Luciano, Managing the Liberalization of Italy’s Retail Electricity Market: A Policy Proposal (September 2018). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2018/45, Available at SSRN: https://ssrn.com/abstract=3293817 or http://dx.doi.org/10.2139/ssrn.3293817

Carlo Stagnaro (Contact Author)

Bruno Leoni Institute ( email )

Torino 10144
Italy

Carlo Amenta

University of Palermo - d/SEAS ( email )

Viale delle Scienze, edificio 13
Palermo, 90124
Italy

Giulia Di Croce

Independent ( email )

Luciano Lavecchia

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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