Italy approves power bill relief for households and businesses

Highlights

Italy's cabinet approved a relief package expected to cut electricity costs by about 15 euros per megawatt-hour starting January, funded mainly via higher system charges.
European gas prices surged to above 104 euros per megawatt-hour last month before easing to 82 euros as Italy, the EU's most gas-dependent power market, faces ongoing volatility.
Italy will raise the IRAP corporate tax band for energy companies by three percentage points, generating 734 million euros in 2027 and 2.5 billion euros over the following three years.

Gas-linked relief plan from January

As reported by Reuters, Italy's cabinet has approved measures to limit the impact of rising gas prices on electricity bills, with Energy Minister Gilberto Pichetto Fratin saying the package should cut costs by an average of about 15 euros per megawatt-hour.

Rome will reimburse part of the cost of natural gas used for thermoelectric power generation, confirming terms agreed with the European Commission last month. Pichetto Fratin says the decree is expected to be funded mainly through higher system charges on power bills paid by some households and companies, while part of the burden is also set to fall on energy producers.

Energy prices remain a major challenge for Prime Minister Giorgia Meloni as protests over the cost of living build ahead of general elections due next year. European gas prices rose sharply after low storage levels and disruption linked to the Iran war pushed the Dutch front-month benchmark above 104 euros per megawatt-hour last month, before easing to around 82 euros on Monday.

Pressure on industry and fiscal implications

Italy's dependence on natural gas leaves its power market especially exposed to fuel price swings, with gas used to produce almost half of the country's electricity, the highest share in the European Union, according to the data cited in the report.

Reaction to the package is mixed across industry and policy groups. Climate think tank ECCO argues the measure will only marginally reduce household bills while reinforcing a fossil fuel-based energy system, and power lobby Elettricita Futura last week accused the government of pursuing "energy populism" as it also faces planned tax increases in next year's budget bill.

Under those plans, Italy will raise the IRAP corporate tax band for energy companies by three percentage points, a move expected to generate 734 million euros in 2027 and about 2.5 billion euros over the following three years. Confindustria, the main business lobby, supports the bill relief move and says it hopes it will help energy-intensive companies cope with high electricity costs.

Earlier, we reported that Bank of England Deputy Governor Sarah Breeden said the UK economy weathered the energy price shock better than expected.

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