Retirement Planning: Utilities In Italy

It should come as no surprise to anyone who reads this blog that we've been exploring the idea of retiring in Italy. In May I wrote a short post on health care costs, a subject it's pretty easy to get a handle on. Today I'm looking at a topic that's not so easy: utility costs. Fortunately, with a little effort it is possible to come up with some fairly realistic numbers.

The first step of course is to figure out what utilities cost here in Philadelphia. Both gas and electricity come to us from the same company: PECO. As a result it's pretty easy to get an idea of our usage from their website. This is what it looks like:

	kWh	Ccf
January	720	303
February	538	284
March	385	232
April	353	179
May	383	80
June	1033	30
July	1223	18
August	1936	19
September	1319	18
October	1051	23
November	701	63
December	563	132
	9485	1381

It's pretty obvious what's happening. Electric usage skyrockets when the weather warms up and the central air kicks in and gas usage goes up when winter rolls around and the hot water system turns itself on. We pay $232 on a monthly budget plan or $2,784 annually. That's for a poorly insulated 1300 square foot 2 story, 3 bedroom house built in the 1930's.

In Italy we're looking at much smaller houses; something on the order of half that size (60 - 70 square meters), built a century or more ago and having 2 foot thick stone walls. Structurally these houses are basically two or three more or less rectangular rooms stacked on top of each other and subdivided various ways (here in Philadelphia there are brick row houses called "trinities" built on the same plan). Typically there will be a "grotto" on the lowest level, often partly below street level used for storage with two living levels above it.

The first floor is usually a single large room containing the kitchen, (typically with a wood burning fireplace that may be the only heat source in the house) dining, and lounge areas. In unmodified houses the only plumbing in the house is on this level so you often find a small bathroom tucked under the stairway or behind the kitchen area. The top level has one or two bedrooms and if you're lucky a reasonably modern bathroom. There's almost always a balcony off the bedroom with a place to hang your clothes to dry.

So what's it going to cost to supply utilities to one of these little places? It turns out there's a website that documents energy cost all over Europe: Europe's Energy Portal. For gas in Italy the prices are in €/kWh: 0,07 for moderate (15,000 kWh/year) users and 0,067 for heavier (30,000 kWh/year) users. Using the numbers on EEP, 1 kWh of gas is equal to .0933 cubic meters. A cubic meter is 35.31cubic feet so 1kWh of gas equals about 3.3 cubic feet. PECO shows our usage in Ccf - hundreds of cubic feet - so we use about 138,100 cubic feet or 41,848 kWh. 

Yikes! But remember, we have an old, inefficient hot water heating system in a poorly insulated house twice the size of what we're looking at in Italy. We're also looking at towns at roughly the same latitude as Naples, and area where it rarely gets much below freezing and might snow a few inches once or twice a year. So let's make some assumptions:

• Half the house means half the heating
• The coldest part of the year is more like November here
• Summer usage will remain about the same since it's hot water for washing, bathing, etc.

When we do that we get this:

	Ccf
January	32
February	30
March	24
April	19
May	9
June	15
July	9
August	10
September	9
October	12
November	32
December	32
	229

22,900 cubic feet or 6,939 kWh. at €0,07 each that comes to €485,75 a year for gas. In winter we'll get a boost from the wood burning fireplace - they're often integrated into the heating system and of course that big hunk of masonry will retain a good bit of heat over night. Even so, I suspect that estimate is low.

Electricity is easier. Outside the summer months when the big air conditioner is on we use an average 520 kWh per month or 6240 kWh per year. EEP shows €/kWh: 0,2031 for moderate (3,500 kWh/year) users and 0,2485 for heavier (7,500 kWh/year) users. That comes to €1.550,64 a year.

Double Yikes! But look at that first chart. What's different about March/April/May? I think that the increase in electricity usage in the winter months is due to the fact that the pump for the hot water system is operating more or less constantly. So what if we use that average? That's 374 kWh per month or 4488 kWh/year for a total of €1.115,27. Still a lot, but more reasonable.

But wait! Most of our electric usage is washer/dryer/range/refrigerator (We have CFLs everywhere except the kitchen). Smaller and more efficient European equivalents will cut those costs by a third or more. And of course we won't have the 65 inch flat screen and home theater sound system in a 70 square meter house. So I'm going to suggest that our electricity usage is going to be about 60% of what it is in Philly - about €670 per year.

So what's that add up to? €1.155 (about $1,443) per year for gas and electricity. I like the look of that number. With health insurance at about $487 (x2) a year we're looking at about $2,417 per year to keep the lights on and stay healthy. For me, that's about 1.5 Social Security checks. It's also about $600 less than Medicare alone for the two of us.

Note: There's a website here that includes some interesting cost of living information. Although estimate is on the low end of their utilities average, it's for a smaller home and doesn't include water and garbage collection so I'm pretty happy with my assumptions.