Liberalisation, customer centricity

Published on Wednesday, 20 December 2017

July 1 2019 is an important date for Italy’s energy industry: as the more protectionist period draws to a close, the electricity market will be fully liberalised. Is Italy ready? How can consumers prepare for this deadline? The conference held by the Adam Smith Society on 14 December in Rome, under the title of “Liberalisation of the energy market - the client or the State?”, attempted to answer these questions.  

The great Scottish economist Adam Smith believed in the invisible hand of the market. All the conference’s speakers agreed on one point – the market’s invisible hand isn’t enough if people are not informed and aware.  

“Throughout Europe the liberalisation of electrical energy has confused consumers, partly because the bills are so complicated,” said Davide Tabarelli, Chairman of Nomisma Energia in his opening speech, during which he presented the results of research which showed that Italy was in line with other EU countries. “The liberalisation process was launched 20 years ago with the privatisation of Enel, which is now one of the world’s most efficient electricity companies, much more so than before privatisation.”

Federico Boschi, an economist specialising in the energy sector, reminded his audience that competition is a means, not an end – the objective is to generate benefits for the consumer. But all consumers should not be regarded as equal – some are smart, and can find the best offer and select it, while others are vulnerable. In their case, state intervention is justified, as it is called on to cut the cost of researching information. Boschi took a sceptical look at the mechanism of auctions, which do not generate true competition among operators and are not a genuine contest.   

Gianluca Benamati, Chair of the Parliamentary Commission for Production Operations and the Democratic Party’s National Energy Spokesman, demonstrated that the auction system is not ethically credible  because “It is the client who must make a choice.” The basic theme is still to provide clear, transparent information so that consumers can make an informed choice. We must take advantage of the time that remains in order to achieve this objective.

Senator Paola Pelino, Vice-president of the Industry, Commerce and Tourism Commission, contributed to the conference by emphasising that the aim of liberalisation must be to create healthy, fair competition that benefits consumers, families and companies. “We’ve done a great deal, but we’re on the right track, as the subject of energy is up for debate in Europe, too. We believe a system involving auctions will not enhance individual consumers’ freedom of choice. That is why our party voted against the liberalisation plan.”

According to Carlo Tamburi, Head of Country Italy at Enel, we are seeing the start of “an extremely important phase in the run-up to replacing a “regulated tariff” system – at the moment, we’re not seeing the kind of clear, transparent conditions that enable clients to choose, and even those in the business often lack the necessary knowledge.”

What is needed most of all is simplified bills. At the moment they present too much data, which should be streamlined.   

Tamburi believes the process of full retail market liberalisation must be gradual. “Nowadays the “regulated tariff” system also includes people who don’t need it, like the VAT-registered small businesses and self-employed freelance consultants, while the more vulnerable are not given adequate protection.”  

The excessive number of operators creates another problem. According to the latest report from the Electricity, Gas and Water Supply Agency, the number of sellers in the free market has increased even further – there are 542 companies claiming to be carrying out sales in the free market, but 48 of these  remained inactive during the year. “Having too many operators creates confusion and provides no benefit to clients,” explains Tamburi, who is hoping for the creation of a “register of suppliers,” the “most important, urgent decision for this phase,” not forgetting “the European Privacy rules coming into force at the end of May. This is something that has not been adequately discussed.”

All attention is focused on the Ministry of Economic Development decree that will finalise the end of the “regulated tariff” system by the end of April. According to Clara Poletti, Head of the Authority’s energy division, the 2019 deadline should be preceded by a wide-ranging information campaign. This would be implemented not only by the Authority itself (“which is also working on the offer portal and the guidelines for the acquisition groups”) but also the government and consumer associations, while Ester Benigni, Head of Regulatory and Market affairs for A2A, cited the huge communications campaign about the RAI network fee included in electricity bills.  

Andrea Peruzy, Chairman and CEO of the Acquirente Unico (Single Buyer) company, insisted that the conference’s title (“the client or the State?”) was badly framed, “because the State is its citizens, and they must be given the tools required for an informed choice.” Peruzy made a critical reference to the negative example of liberalisation in the UK, a process set in motion 30 years ago. “For a long time we regarded it as a benchmark for Europe, but the Antitrust Review in 2016 delivered a far from positive assessment.”

To sum up, Peruzy concluded that, at the end of the day, “Adam Smith’s invisible hand is in fact the citizens themselves.”

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