Italian “Energy/Bills Decree” (Decreto Energia/Bollette)

The Italian government has recently approved, and is now seeking to convert into law, the new “Energy/Bills” Law Decree (Decreto Energia/Bollette) no. 21 of 20 February 2026.

The decree aims to contain electricity prices and has been published in the Official Gazette. It is effective from 21 February 2026.

While the implementing framework is still evolving, the core mechanism provided in article 6 of the Decree consists of an intervention on the marginal cost of gas fired generation, through the reimbursement of (i) certain gas tariff components, with effect as from 1 January 2027; and (ii) emission allowance costs under the EU ETS based on the consumption for an efficient combined cycle gas turbine (CCGT) plant.

Unlike the measure for reimbursing gas transport tariff components, the reimbursement of ETS costs is expressly subject to prior authorisation by the European Commission in accordance with state aid rules.

According to the decree, the necessary funds for reimbursement will be obtained through specific tariff components applied to end customers' electricity consumption, as defined by the national regulatory authority (ARERA). However, it remains to be defined how these charges will be distributed among the different user categories.

As the measure aims to reduce the operating costs of gas generation, which determine the wholesale electricity price for a significant proportion of hours in Italy, the expected effect is a downward adjustment of wholesale market prices.

 

The impact of the measure on the Italian energy market

From an economic perspective, the reduction in wholesale electricity prices may have a negative impact on the economics of energy producers from wind, hydro and solar sources.

Storage assets (BESS) may also be indirectly affected, as compression of gas marginal costs tends to reduce price volatility and peak and off-peak spreads, both of which are key drivers of arbitrage value.

The main area of concern is the merchant segment, and more broadly any project whose revenues are exposed to market prices without a stabilisation mechanism. Projects that are fully or largely uncontracted, or that rely on short-term market exposure, could see a significant reduction in expected revenues if wholesale electricity prices fall permanently.

Even where revenues are contracted, careful attention is required. In particular:

• projects owners without a fixed price PPA, CfD with GSE, fixed price tolling for BESS, or another form of effectively contracted revenues are more exposed to this type of regulatory intervention; and
• even for projects owners with a fixed price PPA or other fixed price offtake arrangement in place, it becomes critical to verify that the relevant contract clearly excludes the ability of the offtaker/toller or counterparty to invoke changes in law or regulatory measures affecting price formation as grounds to seek price renegotiation, rebalancing, termination or other contractual remedies. End customers with fixed-price PPAs have already factored the cost of the ETS into the agreed price. Applying additional system charges to finance the reimbursement of ETS costs to thermoelectric producers could result in the levy being duplicated.

The Decree may raise questions regarding applicability of “change in law” or similar clauses in power purchase agreements (PPAs), financial hedges and tolling agreements, particularly if these clauses are drafted broadly or encompass regulatory or quasi-regulatory measures directly or indirectly impacting the allocation of risks and benefits of the parties.

At the same time, the Decree appears to reinforce the relative importance of regulated support schemes (such as FER X, FER Z, the Capacity Market and MACSE mechanisms), which are less exposed to merchant price dynamics. This suggests a possible medium-term shift towards reduced merchant exposure and greater reliance on regulated or quasi-regulated revenue frameworks.

 

Potential changes to risk allocation under revenue contracts

Given the potential impact, we would recommend factoring this regulatory development into the legal and commercial risk allocation of:

• merchant or partially merchant renewable projects;
• PPAs, particularly where pricing or termination mechanisms could be sensitive to regulatory changes; and
• BESS projects and tolling arrangements, where value is closely linked to spreads and volatility.

In case of a material worsening of its contractual position, a party may be tempted to explore available remedies under Italian law, which include requesting termination/renegotiation based on:

1. supervening excessive onerousness (eccessiva onerosità sopravvenuta) pursuant to article 1467 of the Italian Civil Code;
2. supervening partial impossibility of the undertaking (sopravvenuta impossibilità parziale della prestazione) on the basis of impossibility to benefit from the concrete cause of the contract (i.e., the essential interest of a party in a particular contractual undertaking of the other party);
3. a change of the implicit economic assumptions in entering into the contract (presupposizione contrattuale).

In any case, should a revenue contract be qualified as “aleatory contract”, the remedy of the supervening excessive onerousness mentioned under point (i) above won’t apply. And there will be a stringent limitation to ground any renegotiation/termination request for other reasons, including those mentioned under points (ii) and (iii) above. In “aleatory contracts,” the relationship between the amount of benefit and risk is unknown and uncertain for the parties involved, as it depends entirely on events beyond their control.

 

Conclusions

The reimbursement mechanism for the carbon cost and gas transport tariff components introduced by the Decree is likely to indirectly affect the formation of wholesale prices, despite definition of many aspects of the measure (e.g., the extent of the reimbursement and the associated timing and procedure) will depend on the detailed implementing measures to be adopted (the Italian Parliament has to convert the Decree into law and the Italian NRA (ARERA) will publish the associated operative rules) and on the interaction with EU state aid rules.

Although it is reasonable to expect the Italian Parliament to confirm the decree as law, given its alignment with the government, the European Commission's scrutiny of state aid rules under Article 108 of the TFEU could be thorough and extend to the reimbursement of gas transport components. This is despite the fact that, unlike the reimbursement of ETS costs, the effectiveness of such measure is not formally subject to the approval of the European Commission.

If the measure to reimburse gas transport components were to take effect on 1 January 2027 and were to be classified as state aid, implementing it without complying with the notification obligation would constitute illegal aid, should the European Commission adopt a negative decision, with a consequent recovery order including interests. This is because new aid projects must be notified to the European Commission and cannot be implemented before approval is granted.

In order to qualify as state aid under Article 107(1) TFEU, a measure must satisfy the following conditions: (i) it must be granted by the state or through state resources; (ii) it must confer a selective advantage on certain undertakings; (iii) it must distort competition, even potentially; and (iv) it must affect trade between member states.