The energy sector reveals that competition in Italy remains purely theoretical

Italy does not merely have a problem with competition. It has a problem with its institutional capacity to ensure that competition functions effectively. In recent weeks, three significant events have taken place in the Italian energy sector: events which, taken together, show that energy prices do not depend solely on macroeconomic instability and the conflicts in Ukraine and the Middle East, but also on the efficiency of the markets.

On 30 July, the Regulatory Authority for Energy, Networks and the Environment (ARERA) approved a fine of €5 million against A2A for breaching the REMIT Regulation (the European Regulation on Market Integrity and Transparency). According to the Authority, in 2022 the company engaged in unlawful conduct involving the ‘economic withholding of capacity’, with the effect of setting prices ‘at an artificial level’ – that is, higher than ‘what would have resulted from a fair and competitive interaction between supply and demand’. The decision, which also contains the regulator’s responses to the objections raised by A2A, is extremely interesting because it demonstrates just how sophisticated the debate is: beyond the technical aspects, the outcome of the inevitable legal dispute will have a massive impact on shaping the interpretation of the rules and the behaviour of market participants.

So, whilst this demonstrates an Authority that is more determined than ever, it also raises a general issue: a penalty, however severe, serves as a deterrent only if it is imposed in a timeframe compatible with the decisions of the operators. Four years is an eternity. Now then: the A2A case in 2022 had triggered a much broader investigation, covering the two-year period 2023–24. The findings were published in 2025 and documented widespread potentially unlawful practices. The problem is that the investigation is incomplete, as it relates solely to the day-ahead market. The second part, concerning the so-called dispatching services market, was due to be published immediately after the first, but has been postponed several times: on 23 July, a week before fining A2A, the Authority extended its scope, postponing its conclusion until 31 December 2028. This decision is justified, on the one hand, by the desire to investigate more recent periods as well; on the other, by the intention to assess the introduction of “an integrated regulatory framework, based on ex ante criteria for verifying bids and on systematic and timely ex post monitoring”. In the meantime, no individual proceedings have been initiated against specific companies. The contrast between the two resolutions could not be more striking. Just one week later, ARERA first postponed the conclusion of an investigation begun years earlier by more than two years; then it took a hard-line stance against a single operator. In the first instance, it cited the need to strengthen supervisory tools (including, amongst other things, calling for a substantial suspension of the market). In the second, it demonstrated that it knows how to use the tools at its disposal very effectively. What is its true nature?

Whilst in the wholesale market the problem lies in the effectiveness of enforcement, in regulated infrastructure sectors the problem is even more fundamental: competition is not even allowed to take place. On 28 July, the Italian Competition and Market Authority (AGCM) sent the government and parliament its customary report for the purposes of the annual competition law. On the subject of energy, the Competition Authority raises three issues: tenders for gas distribution, electricity distribution and large hydroelectric schemes. In principle, these tenders are already provided for by law. In fact, there is de facto bipartisan consensus in favour of continuing with the current arrangements. In the case of gas, the tenders are on hold pending an implementing decree from the Ministry of the Environment, which has been announced for at least two years but has yet to materialise: in the meantime, there is a great deal of behind-the-scenes manoeuvring to redefine the scope of the concession areas (currently 172), which would postpone their allocation indefinitely. As for electricity distribution, two years ago the government introduced an extension mechanism, but practical difficulties and the admission that the conditions were blatantly favourable to the outgoing concessionaires have brought everything to a standstill: suffice it to say that any concession fee would be paid at the start of the extension but then passed on via the tariff. Thus, a sum that formally represents the price paid to obtain the extension becomes, through the tariff mechanism, a source of revenue for the concessionaire itself. Finally, on the issue of hydroelectric power, the government has been saying for months that it wishes to negotiate a ‘fourth way’ with the European Commission, so as to circumvent the obligation to hold a tender. In all these cases, the result is the same: the failure to hold a tender prevents the true value of the concession from being determined and allows the incumbents to retain an advantage which, under competitive conditions, would be open to challenge.

The problem, therefore, is not a lack of rules. It is the reluctance to apply them when they affect established interests. Without political will and courage, competition will remain an abstract principle: celebrated in the authorities’ documents but systematically postponed when the time comes to put it to the test.