Italy's new energy decree, which includes proposals to reduce the spread between Italian PSV and European benchmark Dutch TTF gas prices, is expected to reach cabinet within 10 days and at the latest by the end of October, energy minister Gilberto Pichetto Fratin said at the Italian Energy Summit in Milan.
"We're removing the spread," Pichetto Fratin said. "It does not make sense to have a €2-2.5/MWh spread that affects the whole gas system."
"I speak with everyone, I want to correct an anomaly," Pichetto Fratin replied when asked about some market participants' opposition against these measures.
The energy ministry intends to introduce mechanisms to tackle Italy's high gas prices and realign them with other European markets. A potential measure mentioned in a government draft in August would be for market regulator Arera to narrow the PSV-TTF spread by setting negative tariffs for entry capacity at the Passo Gries interconnection point. This would cost €100mn-150mn/yr, a market participant estimated, based on capacity costs and physical flows on the route last year. Another mechanism under consideration would be a liquidity service acting as a spread cap.
Eni chief executive Claudio Descalzi also supported the Italian government's measures, saying that the country should be able to pay a gas price "aligned" with European prices, or at least offset the differential with the large Algerian volumes coming from southern Italy.
"The goal is correct," Descalzi said at the summit. "We must achieve it without penalising Italy and benefiting neighbouring countries that are already profiting from this price differential."
But some market participants are not in favour of these proposals.
"Such unilateral measures risk undermining EU market integration and raise questions of legal compatibility with EU tariff and market integrity rules," wholesale traders' association Energy Traders Europe and Eurogas said in a joint letter seen by Argus.
The two associations highlighted the lack of legal clarity, as negative capacity tariffs appeared "incompatible" with the EU Network Code on Harmonised Transmission Tariff Structures. They also warned of potential breaches of EU competition and state aid rules.
"By artificially lowering PSV prices, the measures would distort competition between entry routes and undermine price signals," the associations said. Other member states could follow, debilitating the internal market.
The measure could also "weaken security of supply" in central and eastern Europe (CEE). Austria and other CEE countries are highly dependent on cross-border flows, especially after the phase-out of Russian pipeline gas. It would redirect gas flows away from storages sites in CEE, they said.
The associations called on the European Commission to assess the legal compatibility of the proposals, discourage unilateral interventions and reaffirm the importance of co-ordinated solutions.
The energy ministry is also making additions concerning suitable areas for renewable installations to make the energy decree primary legislation. The decree will address issues such as virtual grid saturation and the facilitation of connecting data centres to the power grid.
A framework has also been drafted to introduce nuclear power to Italy, which should reach parliament after a cabinet meeting on Thursday evening. As demand is expected to double partly because of data centres, "nuclear power will be the only solution", Pichetto Fratin said.
