Italian Retail Gas Price Spikes
Italian energy and water regulator Arera said June 28 that the country's regulated gas retail prices will increase in 3Q, as a result of international tensions and the resultant sharp rise in world oil prices.
Crude oil prices rose by 57% in one year and by 9% in May 2018 alone, heavily influencing wholesale energy prices, with repercussions on prices for final customers both on the open and protected markets, it said. Unlike many northwest European countries where wholesale gas is now priced off gas trading hubs, in Italy a significant proportion of gas imports remains directly (or semi-directly) indexed to oil prices.
Although Italian retail consumers are free to choose their own energy suppliers on the open market, many still fall back on regulated tariffs.
Starting July 1, an average Italian family on regulated energy prices will see their bills increase on average by 8.2% for natural gas and by 6.5% for electricity, relative to their 2Q2018 bills. That contrasts with April of this year when regulated Italian prices were reduced on average by 5.7% for gas and by 8% for electricity.
Arera said the impact of the retail gas price hike in July should be mitigated by the fact that "household spending is less significant given the very low gas consumption in the summer." It also noted that the electricity price hike would have been higher, had Arera decided not to alleviate part of the increase.
Arera noted that the average wholesale gas price at the Italian PSV hub in May 2018 was about 30% higher than in May 2017, while the price at the larger Dutch TTF gas hub was 38% higher year on year; it said such higher wholesale prices were expected to continue through 3Q2018.
Energy commodity costs make up 42.76% of the average regulated household gas bill in 3Q2018, while taxes represent 37.3%, gas transport and metering account for 17.12%, and system charges 2.82%.
Arera to apply reserve prices to LNG terminals
Separately, London-based price reporting agency Argus said June 28 it had been chosen by Italy's Arera to provide the LNG price component of a new formula to calculate reserve prices in auctions for LNG regasification capacity. Argus said that Arera would use Argus price quotes for Italy delivered prices and US Gulf coast LNG exports. The formula will initially be applied by Arera to the Livorno (operated by OLT Toscana) and later Panigaglia (operated by Snam-owned GNL Italia) import terminals - both of which have been operating at well below their nominal capacities in recent years. Italy's third terminal at Rovigo, offshore Venice, is one of the most heavily used LNG import terminals in Europe - chiefly because it is a key entry point for a Qatar Petroleum (RasGas) supply contract to EDF-owned Edison.