It has become the unwelcome guest at the end of every month, a postcard that arrives punctually to threaten the family budget: the utility bill.
In recent years, global energy market dynamics have triggered a real crisis, transforming electricity and gas from essential services to luxury goods.

The phenomenon, known as ‘expensive energy‘, is not a simple seasonal increase, but the result of a complex ‘perfect storm’ of geopolitical, economic and climatic factors. Households and businesses find themselves having to deal with price increases that in some periods have exceeded 40 per cent, draining liquidity and jeopardising the continuity of many businesses.

In this article we will analyse the roots of the crisis, look at the mechanisms that make up the final price and provide you with a guide to navigating through the numbers and the rhetoric of the crisis.

Why bills exploded: the perfect storm

The high energy price is the result of a multifactorial crisis. The most immediate and powerful cause has been geopolitical instability. The war in Ukraine and international tensions led to a drastic reduction in natural gas supplies, which in turn caused the European reference cost, theTTF (Title Transfer Facility), to skyrocket.

This was compounded by a purely economic factor: the strong recovery in global demand following the COVID-19 pandemic. Industries revved up their engines to full capacity, but stocks could not quickly fill the supply-demand gap.

Finally, one cannot ignore the electricity price formation mechanism, known as marginalist pricing. In Italy, the price of electricity is determined by the most expensive energy source used to meet demand, which is almost always gas. When gas becomes expensive, it sets a high price for all the electricity produced, amplifying the impact of the price increase on all bills.

The impact: price rises, poverty and inflation

The extent of the high energy prices can only be fully understood by analysing official data from bodies such as ARERA. Between 2019 and the beginning of 2024, the price of electricity in Italy shot up by an estimated 107 per cent, one of the worst increases in Europe.

These fluctuations translate into an annual expenditure for the average household that, in the most acute moments of the crisis, saw its energy bill more than double compared to pre-crisis levels.

The most devastating impact of high energy prices, however, has been on the production sector.

• Energy-hungry companies: Companies operating in sectors such as steel, ceramics and chemicals have seen energy costs rise to an unsustainable percentage of total production costs. Many have had to resort to reducing production (so-called ‘curtailment’) or temporarily closing plants, putting thousands of jobs at risk.
  
• From rising production costs to inflation: The exponential increase in corporate bills was immediately transferred along the entire value chain. This acted as a powerful accelerator of inflation, pushing up the prices of key consumer goods, from food to building materials. In practice, the higher cost paid by business turned into a higher cost paid by the end consumer, amplifying the perceived cost of living crisis.
  

The hidden cost of regulation

It is not only the price of the raw material that weighs in, but also the regulatory mechanisms that make up the final cost for transport and meter management. A glaring example is the renewal of distribution concessions: the distributor pays a sum to the state, but that cost (plus a remuneration margin, estimated at around 5.6 per cent as required by the regulatory mechanism) is passed on in full to the citizen’s bill.

The most serious consequence of all these dynamics is the increase in energy poverty: it is estimated that millions of Italian households are now struggling to cover the costs of essential energy needs.

The price of populist rhetoric

In a climate of great social concern, high utility bills have quickly become one of the most fertile grounds for political rhetoric. Faced with the urgency of price increases, promises of a quick resolution have often been made, obscuring the technical complexity of the problem.

Here is a short anthology.

• The Phantom of Decoupling (Schlein and the Iberian Peninsula): Perhaps the most illusory and ‘evergreen’ argument has been the promise of decoupling the price of electricity from the price of gas. In this regard, statements like Elly Schlein’s about ‘decoupling like they did in Spain and Portugal’ ignore three quick and intuitive points:
  • Decoupling cannot be a unilateral decision: it MUST NECESSARILY go through the European Commission.
  • Spain and Portugal enjoyed the ‘Iberian Exception’ through a temporary derogation granted by the Commission, which expired on 1 January 2024. Proposing this measure today as an immediately implementable solution is a clear example of simplified rhetoric.
  • Spain has a solid fleet of nuclear power plants.
    
• The enormous and irremovable impact of system charges: Although the public debate has focused primarily on the fluctuation of the price of the raw material (gas/TTF), System Charges represent a huge and essentially irremovable slice of the final cost for the citizen. The policy, while temporarily cutting them, has not solved the underlying problem: Italy has a structure of charges that weighs heavily on the end user.
  
• The total price freeze: A further promise was to impose a total and permanent price freeze, ignoring the fact that such a massive intervention is unsustainable in the long run without a huge recourse to public debt.

The future of energy: towards independence

The crisis has exposed a structural vulnerability: our excessive dependence on gas. The long-term solution for permanently lowering the cost on the bill necessarily lies in accelerating the ecological transition.

Investing massively in renewable energies (wind, solar, recovery of the 33% of hydroelectric capacity currently unexploited due to the degradation of reservoirs) and improving storage technologies is the only way to achieve energy independence and stabilise prices.

The hypocrisy of ‘no to everything’ and the price of inaction

The challenge of expensive energy is complex and requires global and national responses.

However, we cannot ignore Italy’s greatest contradiction: eternal energy dependence is also the result of chronic inaction and the ‘No to everything’ policy. It is not possible to complain about the unsustainable cost of energy, while at the same time fuelling a battle against regasifiers (essential for diversifying sources), against thermo-valorisers (crucial for the circular economy and capable of powering entire urban centres) against domestic methane extraction, against a return to nuclear power (an ideal solution for basic stability), or even against the development of wind turbines and solar fields in the name of ‘landscape’ (as if there were only one possible ‘landscape’ and no more ‘landscapes’ that evolve with society).

Political parties, local committees, and various ‘anti-pipeline ‘ movements have contributed to paralysing the country, keeping us tied to expensive and unstable foreign gas.
The real defence against high bills lies in economic awareness and, above all, in the demand for courageous policies that overcome the ideological veto.

As long as Italy says No to any infrastructure necessary for independence, the cost of energy will remain a luxury imposed by collective hypocrisy.