Free market, competition between companies and consumer protection

Marta Moreno Heras – Legal & Compliance Manager of Audax Energia

Energy liberalization? Yes, but when? First it was July 2019, then July 2020, now it seems that we have reached the definitive date: January 1, 2022.

The various postponements and delays that have marked the path towards the start of the free market demonstrate how delicate the issue is. The Authority itself, ARERA, has rightly recalled the need to gradually arrive at an appointment of great importance that - involving electricity - closely concerns the daily life of all citizens.

However, on the other hand and just as rightly, the Italian Antitrust, (Agcm - Competition and Market Authority), in its weekly bulletin of 17 February 2020 published the text of the opinion addressed to the Presidents of the Chambers, reiterating its opinion against a further shift that could lead to "serious risks to competition" and lost savings for families, who in the climate of uncertainty of recent years have become distrustful and little inclined to change. In fact, the AGCM has asked Parliament that the date of January 2022 be “non-derogable and, therefore, not susceptible to further postponements”.

A problem, the one highlighted by the Antitrust, which calls into question the principle of free competition in a market, the electricity one, in which it is not always respected. Starting from the fact that, despite the many subjects that operate there, only the sellers who also act as distributors have the opportunity to provide electricity for those subject to the service of greater protection.

A situation that led to “dominant positions on a local basis" And "generated phenomena of abusive exploitation of dominant positions”. For the AGCM, this “reputational advantage" enjoyed by the operators of the protected market must be carefully considered and evaluated when it comes to moving to the liberalized one.

The reasons for this decisive intervention concern both the protection of the interests of us consumers and our possible savings and the guarantee that a regime of true competition is established in the energy sector which, as mentioned earlier, is not yet fully achieved. In fact, the risks of this half-finished transition must not be underestimated. First of all – as the AGCM underlines – the various postponements have caused not only “uncertainty and confusion" but also "a poor propensity for change”, with the consequence that many Italians are currently still tied to the old operator not because of declared "loyalty", but rather because they are uncertain or waiting for greater clarity on the methods of the transition. A sterile interval of time - let's say - in which users have not even consulted the offers - sometimes advantageous - made by other sales companies operating on the free market.

And this is why the Authority is pushing for the so-called "mechanism" to be modified.silent assent”. As of January 1, 2022, those consumers who – for various reasons – have not yet chosen an energy supplier will not have to be automatically reassigned to the sales company directly linked to the manager who supplied them with electricity when they were still “protected” customers. To avoid market concentrations on “advantaged” suppliers that a mechanism of this type could entail, the AGCM is proposing competitive auctions in which these customers will be snapped up by the companies that can offer them the best tariff conditions. But the Ministry of Economic Development will have to deal with this in detail and – we hope – with the aim of ensuring real competition.

Above all because there is no doubt that, to date, consumer acceptance of free market offers is proceeding slowly: a recent survey commissioned by Selectra showed that, at the current rate, it would take another 12 years to reach 100% users… 

A situation that is reflected in the competition of the sector in general. In the presence of disoriented or demotivated consumers, who do not look around for advantageous offers (therefore little demand), the space for other companies capable of making interesting and convenient offers becomes increasingly restricted. Especially in a market like ours, closed and controlled by a limited number of players, already very strong in themselves due to history, position and percentages of users served.

And in a regime of weak competition, the existence or survival of those companies that try to enter the energy market - offering different, more efficient services and at more competitive prices - is increasingly difficult. If not impossible.

Not only that. In view of 2022, there are other issues that have a lot to do with free competition. The most relevant, in terms of weight and impact on business, concerns the arrears and delays in payments which weigh on the coffers of energy sales companies.

A problem that, although it persists, has seen, over the years, the introduction of important corrective measures that also protect those who provide the service.

To name one, the fight against the so-called “energy tourism”, or the practice of changing supplier leaving unpaid bills behind. A phenomenon that is quite widespread in our country if, according to one study promoted from Facile.it, involves something like 120 thousand people every year.

ARERA intervened to put a stop to this illicit practice thanks to two protection mechanisms:

• first, the SII or SII System (Integrated Information System), a database on electricity and gas meters active in Italy and their respective holders. In this way, the selling company that finds itself with unpaid bills has the possibility of submitting a request for compensation to recover the amount owed
• second, the Default Payment Fee or CMOR which allows old energy suppliers to charge a customer's defaults on the bill of the new electricity and gas supplier.

A final thought. The protection of consumers' interests remains fundamental. As does their satisfaction as customers.

However, the Antitrust note reiterates a fact that is sometimes – unfortunately – forgotten: the advantages for consumers generally arise in market contexts that are as liberalized as possible, in which companies can operate in real competition, in full compliance with the logic of competition.