Italy approves moves to lower power bills for families and firms

Italy Approves New Measures to Reduce Power Bills for Families and Firms

Government Response to Rising Energy Costs

ROME, Nov 9 (Reuters) - Italy approved measures aimed at limiting the impact of rising gas prices on electricity bills for households and businesses from January, its energy minister said on Monday. 

Energy prices are a major headache for Prime Minister Giorgia Meloni who faces mounting protests over the cost of living across Italy ahead of general elections due next year.

Italy's Dependence on Natural Gas

Italy is heavily dependent on natural gas, which is used to produce almost half of its electricity. This represents the highest proportion in the European ​Union, data showed.

Details of the Approved Measures

"The measures will result in an average reduction of about €15 ($16.80) per megawatt-hour," Gilberto Pichetto Fratin said in a statement, after they gained cabinet approval.

Rome will reimburse a portion of the cost of natural gas used for thermoelectric power generation, Pichetto Fratin said, confirming terms agreed with the European Commission last month.

Criticism and Challenges

Climate change think tank ECCO criticised the measure, saying it would only marginally lower household power bills, while keeping Italy locked in an energy system based on fossil fuels.

Low gas storage levels in Europe and the disruptions caused by the Iran war pushed the benchmark Dutch front-month contract to a high over €104 per megawatt-hour (MWh) last month, before a retracement to around €82/MWh on Monday. 

Funding and Industry Reaction

The decree is expected to be mainly funded by an increase in system charges in power bills paid by some households and companies, Pichetto Fratin said previously.

Part of the funding needs are also expected to weigh on energy producers, who are critical of the measures.

The Elettricita Futura power industry lobby last week said the government was pursuing "energy populism", pointing also to planned tax hikes for the sector in next year's budget bill.

Tax Changes for Energy Companies

Italy will hike the IRAP corporate tax band for energy companies by three percentage points, raising €734 million in 2027 and around €2.5 billion over the next three years.

Confindustria, the main Italian business lobby, backed the move, which it said it hoped would help energy-intensive firms cope with high power bills.

Exchange Rate Information

($1 = 0.8926 euros)

(Reporting by Giuseppe Fonte in Rome and Francesca Landini in Milan; Editing by Alexander Smith)