Italia : June 15, 2010

On 1 July, Italy will recognize its third anniversary of energy market liberalization for all industrial and household interests.  While it appears industry has benefitted greatly from market liberalization, the same cannot be said for households.

According to a recent survey by the Cerved Group, approximately 75 percent of Italian industry has changed electricity and gas suppliers since 2007.  Regarding households, the movement has been quite slow.  Over 90 percent of Italian families still remain on contract with their incumbent supplier.  The main attraction of these types of contracts is that the price is protected by the Government with the deregulated market offering a more volatile situation.  In our view, the relative non-movement with households is mainly due to both consumption and risk.

Italian industry has more consumption than a household thereby allowing for greater savings opportunities.  Therefore, where a factory could save tens of thousands of euro per annum in the free market, a household might only expect a savings of approximately one hundred euro per year in making the same switch.  A household may view leaving the protection of the regulated market for one hundred euro not worthy of the risk while industry would view the risk as small given the monetary reward.
Compounding the situation is public ignorance surrounding the free market.  Many Italian households hold the view that by entering the free market, one is subjecting themselves to the possibility of losing power as the new supplier is a somewhat unknown entity.

Slowly, but surely, Italian consumers will start to warm towards the free market for their household energy supplies.  However, the process is expected to be slow and a more vibrant energy market for household consumers may not be witnessed for several years to come.