DFC Economics assisted ARERA in designing and implementing the auction that transferred about 4.5 million Italian electricity consumers ex-officio from the regulated supply service (Maggior Tutela) to market-based supply starting from July 2024. The tendering process has been designed by ARERA, the Italian sector regulator, and implemented by Acquirente Unico, in January 2024.
In order to win those customers, competing suppliers bid a discount over the current regulated tariffs; each winning supplier must apply, for three years, that discount to the consumers it will acquire as a result of the auction, unless those consumers choose to switch supplier or to subscribe to a different supply option.
The price discounts that cleared the auction were substantial. On average, each consumer will save about 130 €/year compared to the current regulated tariff. If all consumers assigned via the auction choose to be supplied at the auction clearing prices for the next three years, the total savings generated by the auction will turn out to be in the order of 1.8 billion euros. The results of the auction can be found at: https://www.acquirenteunico.it/stampa/notizie/esito-procedura-servizio-tutele-graduali-i-clienti-domestici-non-vulnerabili
In many countries, concerns that electricity retail competition might not be effective have been raised. Suppliers appear to be able to increase prices above competitive levels because of the inability or unwillingness of a large share of their customers to engage in the market. Such a flaw is hard to address with the usual competition policy measures, since these measures focus on the supply side of the market. Perhaps, that explains why dissatisfaction about the retail market performance has led to calls for consumer protection measures, including the reinstatement of price regulation, even in Great Britain, a pioneer of retail competition.
The auctions carried out in Italy in 2024 provide reassuring evidence that consumer aggregation and tendering may provide an effective way to deliver the benefits of competition to all electricity consumers.
