kWh energy costs: electricity prices in Italy

If you are looking at information because you want to change your electricity provider and save on your power bills, the most important value you should consider is the price per kWh of energy (or energy component price).
It is important to compare the price per kWh you already pay with the price per kWh of the offer you are interested in. The kWh (read “kilowatt-hour”) is the unit of measurement for the energy you use; the kWh you consumed during the billing period is shown on your power bill. This amount is measured by your electricity meter and sent by the energy distributor to your provider, who charges the amount on your bill. The price per kWh of energy, however, is only a part of the overall energy price you are going to pay and is not always the same: it varies from one provider to another and according to the offer you choose (fixed-rate or differential). Certainly, however, a higher price per kWh translates (consumption being equal) as a higher bill.

Who decides the kWh price?

If you are wondering who decides how much each kWh of energy consumed will cost you, the answer is “it depends”. If you are still served in “Maggior Tutela” (or 'regulated market' or 'protected market') then the kWh price is set every three months by ARERA (the Italian Regulatory Authority for Energy, Networks and the Environment). If, on the other hand, you are in the free market for energy, the kWh price is decided by your provider.

Why does the kWh price change over time?

ARERA updates the kWh price of energy on the protected market every three months, while free market providers can also make offers with a locked price for 12 months or more. What influences the kWh price is above all the so-called PUN Index GME (Single National Price), i.e., the reference index for energy purchased on the Italian energy exchange. Various sources are used to produce energy: oil, gas, photovoltaic, hydroelectric, wind power and so on, and some of these sources, such as fossil fuels (oil and gas) do not have a fixed price. In the case of oil prices, for example, you can easily notice fluctuations when you go to buy petrol. Likewise, the price of electricity must be updated periodically, as the cost of the raw materials from which the energy is produced will change over time. The sources from which your energy is produced will also vary: in summer, for example, there will be more electricity production from photovoltaics, while in winter there will be less.

Energy prices on the free market

Providers operating in the free market, like Enel Energia, have the option of choosing the price per kWh of the energy component, to be charged to the end customer, and can also make “fixed price offers'. This means that, for a certain number of months set in your energy contract, you will always pay the same price for each kWh you consume.