Low natural gas prices this winter season will result in significant declines in regulated electricity prices for households in Italy in the second quarter of the year, according to the Italian energy authority ARERA.
The low natural gas prices will be reflected in the March bills and in the power bills in the coming months, Stefano Besseghini, president of ARERA, told Reuters on the sidelines of an industry event in Milan on Wednesday.
"We will see the impact on electricity in March, and realistically it will be significant," said Besseghini, who was referring to the regulated electricity prices, which covered around one-third of Italian households last year.
Italy will begin phasing out the regulated price scheme in July. Most of the currently covered customers will move to an electricity price on the free market, while around 4.5 million vulnerable customers - such as the elderly and disabled - will remain under the regulated price regime.
Due to its relatively high dependence on natural gas for electricity production, Italy has seen wild swings in power prices in recent years.
The share of natural gas in the power generation mix in Italy is around 45%, much higher than in Germany, France, or Spain.
That's why electricity prices in Italy were higher than the European average last year.
However, the slide in natural gas prices over the past months - despite being winter - will lead to lower bills in Q2.
Weak demand from Europe's industry, due to lower consumption and weak economies, has been one of the reasons of the gas price slump this winter, despite the peak demand period for heating.
High levels of inventories, weak demand from industry, and increased confidence that Europe could go through the winter without major supply disruptions have all led to traders becoming more bearish on Europe's natural gas prices in recent weeks.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com More