Enel, A2a, Iren and more: who will win and who will lose with the free energy market
Who are the (potential) winners and losers of the transition from the protected market to the free energy market, according to the stock exchange, banks and analysts
The end of the greater protection service for electricity and gas supplies is imminent: 1 January 2024 is the date of entry into the free market for fossil fuel; while tenders for electric users will be held on January 10, with an effective transition in April. As Startmag also explained , the transition from the protected market to the free one will be gradual because consumers will still remain subject to the conditions of Arera (the regulatory authority that sets prices) for a few more years.
In short, gas users who do not actively exercise choice will be placed on a Placet scheme, on standard and “regulated” terms, with the same supplier. As regards electricity, however, consumers still under greater protection will move to a new supplier on the market through an auction system: in summary, the companies that offer the lowest supply prices will win the user lots. .
For users in vulnerable situations – for example recipients of social bonuses, people with disabilities and elderly people over 75 years old – the protection regime will be maintained, with prices and contracts established by Arera.
IS THE FREE MARKET ADVANTAGEOUS?
In its latest memorandum, Arera wrote that "the average of available offers calculated for the free electricity market in the six months analyzed [January-June 2023, ed. ] remains stably above that of the enhanced protection service, despite a path of reduction during the semester and of rapprochement with protection". “Even with regards to gas”, the authority continued, “the situation is similar”.
In 2022, on the other hand, users on the free market paid a lower electricity price on average than those on the protected market. In the same year, the free market allowed small and medium-sized businesses to save around 11 million euros in energy costs.
THE SCHOLARSHIP AWARDS A2A, ACEA, IREN, HERA…
The transition to the free market is also considered convenient for electricity and gas supply companies, especially local ones. As MF-Milano Finanza noted, in the days following the publication of the so-called Energy Decree – the decree-law which establishes the end of the protected market, without extensions – the shares on the stock exchange of companies such as A2A, Iren and Acea grew. More specifically, between Tuesday 28 and Wednesday 29 November A2A and Hera each gained 1.8 percent; Acea 1 percent; Iren 2.5 percent and Erg 2.7 percent.
Investors seem to believe that the transition to the free market will benefit local utilities – A2A is mainly concentrated in Lombardy, Hera in Emilia-Romagna, Acea in Lazio, Iren in the centre-north -, which will be able to expand their user base.
Equita analysts maintain that "the abolition of the enhanced protection market is a slightly positive element for the utilities A2A, Iren, Hera, Acea". Similarly, the Intermonte bank thinks that liberalization "should represent an opportunity to increase the customer base for local utilities such as A2A, Hera and Iren".
DOES THE FREE MARKET DISADVANTAGE ENEL?
Equita believes that the free market is "slightly negative for Enel", the energy company that represents the leading supplier of electricity and (on the free market) gas in Italy. By virtue of its position as incumbent , i.e. as a former monopoly company that continues to have a dominant position in a liberalized market, Enel will now have to "renounce some contracts", writes MF .
According to Arera data , in 2022 Enel had a market share of 59.1 percent in the supply of electricity to domestic users, between the free market (32.2 percent) and the protected market (26.9 percent). In the same year, A2A's total share was 3.6 percent; that of Hera of 3.3 percent; that of Acea of 3 percent; that of Iren of 2.9 percent; that of Eni (present only on the free market) of 8.4 percent.
On the free gas market, again according to Arera, Enel was the leading operator in 2021, with a share of 23.7 percent. Followed by Eni (15.8 percent), Hera (10.2 percent), A2A (4.6 percent) and Iren (4 percent).
WHO EARNS FROM IT
The protected energy market, to put it simply, works like this: there is a person who buys energy on the market and sells it to the supplying company; the supplying company adds a margin (established by Arera) and finally resells the energy to the ultimate customer. On the free market, however, the supplier company purchases energy directly on the market and resells it at a price that it establishes independently. According to MF , "a principle could be applied according to which it is always true that with the free market the utility makes more margins, but it is not always true that the customer pays less for energy on the protected market".
On lavoce.info Gionata Picchio (deputy director of Staffetta Quotidiana ) and Antonio Sileo (deputy director of Nuova Energia ) wrote that "the end of protection has a double objective: not only to leave the final market to competitive logic alone, but also to rebalance a distortion dating back to the Bersani Legislative Decree of 1999 which, if in production it had set antitrust limits, in sales it had instead left the entire residential market to Enel (80 percent) and the large municipal companies".
The two analysts point out that the "winners" of the free market "should be the non-vertically integrated electricity sellers, who in the tender will be able to win large packages of customers from the enhanced protection operators". While the losers will be Enel, the incumbent , "which in the best of cases in the auctions will only be able to reacquire part of the lost customers, due to a ceiling established by the regulation" (no more than 30 percent of the total users at auction) .
As for consumers, Picchio and Sileo write that "they don't seem to be the ones to come out as losers from the 2024 deadline. In the immediate future, with the auctions, they could also save" on electricity bills.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/mercato-libero-vantaggio-utility-locali/ on Mon, 04 Dec 2023 09:37:58 +0000.