Italy and the European Commission are edging toward a deal that would allow the country to cap natural gas prices, giving Premier Giorgia Meloni a tool to shield voters from a rise in energy bills.
The mechanism would effectively cap the price of gas used to generate electricity, limiting price increases that feed through to power bills, according to people familiar with the matter who spoke on condition of anonymity. Under the proposal, which hasn’t yet been finalized and could still change, Italy would be able to compensate gas-fired power producers when gas prices rise above an agreed threshold, one of them said.
Spiraling energy prices are among the biggest challenges for governments across the European Union and are set to be discussed by the bloc’s leaders at a summit in Brussels on Oct. 15-16.
Meloni, who faces a general election next year, has been under increasing pressure to act on energy prices sent spiraling higher due to conflict in the Middle East. Her government has spent at least €2.1 billion ($2.4 billion) since March on tax cuts to lower gas prices at the pump. Energy majors including state-owned Eni SpA recently said they would voluntarily cap fuel prices, amid talk in her coalition of imposing a windfall energy tax in the upcoming budget.
Some of the people noted that regulators in Brussels were working to ensure that the package is in line with the EU’s state aid rules before coming to a final decision. They said the timing of any future EU approval of the plans remains uncertain. Italy would finance the reimbursement through system charges on consumers that would be significantly smaller than the overall savings, the people added.
Meloni’s office and the commission declined to comment.
Energy Minister Gilberto Pichetto Fratin told lawmakers Thursday negotiations for the gas price cap with the EU were “in their final phases.”
Commission President Ursula von der Leyen told the European Parliament this week that to address the rising bills, the EU regulatory arm needs to support member states to respond to the immediate pressure.
A deal would resolve a months-long standoff between Rome and Brussels that has held up a key part of Meloni’s “decreto bollette,” legislation passed earlier this year to reduce energy costs. The commission had objected to Italy’s original plan for shielding gas-fired power generation from carbon costs, forcing the two sides to negotiate. Meloni had said she was confident she would eventually secure the commission’s approval.
Italy has long pushed for changes to how European electricity prices are formed, saying the country’s heavy reliance on gas-fired generation leaves consumers and businesses exposed when gas prices surge.