Italy Approves Gas-Plant Compensation Mechanism Capped at €58.9
Key Facts
Italy issued Decree-Law No. 207 on November 13, 2026, which took effect the day after its publication in the Official Gazette, tightening measures to contain energy costs. The decree resets compensation for gas-fired power plants so that it cannot exceed the positive difference between the spot gas price at the Dutch TTF hub and a benchmark of 58.9 euros per megawatt-hour. The Official Gazette said the intervention comes amid continued "exceptional volatility in natural gas prices and the resulting effects on electricity prices." The new formula links compensation to spot-price movements, while the benchmark set out in the decree caps the amount calculated. The measure combines a change to the gas-plant compensation mechanism with steps aimed at easing the impact of generation costs on the electricity market.
The decree requires energy regulator ARERA to adopt guidelines within 30 days to assess the economic withholding of generation capacity in the wholesale market and set criteria for identifying abusive conduct. This gives the regulator a role in clarifying how to address conduct that could affect the availability of energy offered in the market, alongside its oversight of compensation. The text does not deal only with the cost of gas itself: from January 1, 2027, it expands the costs that may be included in compensation for gas-fired plants and plants generating thermal power from derived gas. The additions include specified variable components of natural gas transmission tariffs and charges for gas used to meet system needs. The decree thus sets a broader range of eligible costs, with a specified start date for these components.
The compensation mechanism will be funded through charges on parties responsible for balancing the system, while the decree exempts specified volumes of renewable energy production and legacy contracts. It also sets a separate cap of 15 euros per megawatt-hour on the charge related to covered renewable energy supplied to customers on contracts whose prices are not linked to the spot-market index. Combining compensation with charges means lower generation costs alone do not determine how much customers pay; the text also specifies funding sources for the mechanism and some limits on passing costs through. The details available in the decree do not state a single amount for the final reduction in bills. How these arrangements affect customers will depend on the charges and resources determined by the relevant authorities.
The government’s move follows a wave of rising energy prices in Italy during September, according to Terna’s monthly report. The average spot electricity price reached 207.5 euros per megawatt-hour, up 15.3% from August, while the average gas price at the PSV index rose to 79.31 euros per megawatt-hour, a monthly increase of 22.9%. The comparison shows the scale of the pressure preceding the decree, but September prices do not represent a new compensation cap: the text links the mechanism to the applicable spot price and the benchmark set at 58.9 euros. This comes amid what the Official Gazette described as continued exceptional volatility in gas prices and its effects on electricity. The monthly figures in Terna’s report relate to September and do not describe a price move on the day the decree was issued.
As a near-term implementation step, ARERA must determine how resources allocated to reduce gas charges applied to end customers will be used by November 30, 2026. The decree limits this use to available amounts and public-finance objectives, making the forthcoming regulatory decision part of determining how support is passed on to consumers. The deadline falls after the decree’s publication and entry into force in November, and before specified gas transmission tariff components begin to be included among eligible compensation costs on January 1, 2027. These dates set out the implementation sequence: market guidelines first, then a decision on resource use before the end of the month, followed by the additional cost items taking effect at the start of the year. The regulator’s decisions are expected to clarify implementation details within the limits set by the decree.