Why electricity prices have soared in France

Electricity prices jumped 5.9% in June for the 25million households which buy from EDF – but the two million who are with competitors also face rises.

26 June 2019
By Connexion journalist

The rise translates to an extra €85 on annual bills for the majority of French homes which use electric radiators for heating.

EDF responded in mid-June by launching a new deal, Mes jours Zen, promising up to 30% off prices at weekends and on one weekday of the client’s choice.

EDF prices are regulated and controlled by the Commission de Regulation de l’Energie (CRE), an independent body which fixes prices for both electricity and gas.

It suggests changes once or twice a year to take into account the varying costs of production and EDF (electricity) and ENGIE (gas) commercial running costs.

In the latest changes, regulated tariffs have gone up for electricity and down by 0.5% for gas. Gas is expected to drop again in July due to a sharp decline in world prices.

Regulated gas prices are due to end by 2023 after France’s highest administrative court ruled that the CRE-fixed tariffs impede competition and were against EU regulations.

Since 2007, consumers have been able to switch to other suppliers where the price is based on the open market and may be cheaper than EDF or ENGIE prices. How-ever, changes in the regulated prices often affect competitors too.

The latest 5.9% increase to EDF regulated electricity bills was originally planned for January, but was delayed to avoid giving strength to gilet jaunes protestors.

Explanations for the price rise focus firstly on parts of the formula concerning the link between carbon pricing and wholesale prices for EDF competitors.

The carbon price rise is due to EU reforms to restrict carbon quotas as part of efforts to limit global warming.

The government says it hopes to introduce a new formula in 2020.The second reason concerns taxes on consumers, which now make up 30% of the price paid and which rose automatically with the carbon price-related rise.

Even with the price rise, France’s electricity is around 20% cheaper than the European average, with a price of €0.18 per kWh. Germany’s electricity is €0.30 per kWh, and Spain’s €0.25 per kWh. UK tariffs are around the same as France’s.

In an interview with Les Echos, Environment Minister François de Rugy warned that changing the formula will not be easy.

He pointed in particular at a lever in the formula called accès régulé à l’électricité nucléaire historique.

This is determined 70% by the price of nuclear-produced electricity and 30% by the wholesale market, with proposals to give more weight to nuclear power over renewable sources to lower costs to consumers.

This is opposed by both greens and carbon source producers.

While still a small part of the French electricity market at below 5%, renewable energy is likely to play a larger role in the future.

Mr de Rugy said the last tender for sea-based wind farms, won by EDF, came in at €45 per MWh, compared to €140 per MWh for six earlier tenders. The government aims to have 10% of production from renewable sources by 2030.

The price rise has put pressure on the government to take action against the advantages enjoyed by many EDF employees.

Before the company changed its statutes so part of it could be listed on the stock market, staff had government employee status.

Perks included higher wages than in the private sector, enhanced pensions and nearly free electricity.

Efforts to reduce the perks have run into union opposition but the Macron government has been given extra ammunition by a Cour des comptes report, which pointed to automatic salary increases depending on length of service and not job function or productivity.

 

Since 2007 you can change supplier

Since July 2007 households have been able to move from EDF to an alternative electricity supplier and there are now more than 100 such suppliers in France, although some are restricted to commercial use.

Alternative offers include green options, with the definition of green being if the supplier can prove they have produced or bought in at least as much renewable energy as the client has used.

The transfer of your account to a new supplier is carried out entirely by that supplier and is usually all completed online.

You can compare offers and prices at energie-info.fr.

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