► “Competition and equity issues arise”
Sylvain Le Falher, founder and managing director of the broker Hello Watt
“This decision is based on the observation of a very sharp rise in the price of gas, never seen in the past, which is weighing on the purchasing power of households. We are also approaching an election period and this is pushing the government to take control of the subject.
→ THE CONTEXT. Government blocks gas prices
But the implementation of this tariff shield nevertheless raises a lot of questions. For households that heat themselves with gas, it solves the problem of future increases, but does not erase those already recorded.
There are competition and fairness issues. Many energy suppliers have offered offers indexed to this regulated tariff, being 5% to 10% cheaper, but on the basis of a tariff that reflects the evolution of supply costs, i.e. – tell the evolution of world gas prices. With this blockage, this will no longer be the case and some will probably not be able to sell at a loss for several months, as the government asks Engie to do.
The system also risks being inequitable, not only between suppliers but also between consumers. Because a person currently at the regulated price will not suffer the increases expected this winter. But it may not pay them afterwards if it decides to leave the TRV to take a market offer.
This decision also puts the Energy Regulatory Commission (CRE) in a delicate situation, one of whose missions is to guarantee identical, clear and lasting rules of the game for everyone. In the past, it has always given unfavorable opinions when the tariffs no longer cover the costs.
The system chosen for electricity is a little different, since the government has decided to limit the 12% increase planned in February for the regulated tariff to 4%, by lowering taxes. It could reduce the VAT or the contribution to the public electricity service (CSPE), which is used in particular to finance renewable energies. But in any case, it will set a precedent. In the future, when the price of electricity increases again, it will be difficult for him not to do the same thing again.
→ EXPLANATION. Why electricity tariffs will increase by 12%
There was another way to lower the French bill. The government could have increased the volume of nuclear production that EDF must sell to its competitors. This would have allowed more households to benefit from cheaper and carbon-free electricity, thanks to nuclear power plants which are already depreciated.
The government’s decision is a reminder of similar political choices made in 2013 and 2014. Each time, the price freeze had been retested by the Council of State and consumers ended up receiving retroactive invoices.
Finally, many uncertainties also weigh on the exit from this tariff shield. The government is counting on a sharp drop in gas prices in the spring. But it is difficult to make reliable forecasts, especially since no one had foreseen the current surge in prices. “
► “It was the right time for an emergency measure”
Francois Carlier, general delegate of the CLCV consumer association
Faced with increases in the price of energy, the government absolutely had to take effective emergency measures for the purchasing power of households. We can consider that the objective is reached by limiting the increase in the price of electricity. Perhaps a minus with the blocking of regulated gas prices, even if the timing has been rightly chosen. In France, gas is used mainly for heating. The period from October 15 to 1is April is therefore the most concerned, even if some regions experience harsh temperatures both earlier and later.
→ READ. Energy price increases: a check for € 100 for nearly 6 million households
Moreover, the government’s idea is to freeze gas prices until April with the hope that, as specialists believe, the curve will then be downward. By not passing on this decrease, the government will then reduce the foreseeable increase for this winter to a period when much less gas is used.
Observers are nonetheless right to point out the already high prices for energy – and particularly gas. We believe that this freeze should in fact have been accompanied by a reduction in VAT on the consumption part of the invoice. The latter concerns around 80% of the total amount payable. By reducing the VAT from 20% to 5.5%, this could lead to a price including VAT down by almost 12%. Enough to largely erase the recent rise.
This would have been legally possible since Brussels gave its authorization to the Member States. This would also have been financially feasible since with the soaring energy prices, the government will receive a surplus of tax revenue which will be much higher than the 600 million euros mentioned by the Prime Minister. Freezing prices and lowering VAT would then have constituted a “complete package”.
This news can also make us think about the liberalization of markets and the end of monopolies. Last March, we explained to the CLCV that we were in favor of a return to the monopoly on electricity. France’s specificity with its nuclear production capacity should protect it from variations on the wholesale electricity market, which is not the case. This is a little less the case for gas since our country is not a producer.
→ ANALYSIS. Energy: the price of gas at a record level in Europe
On the other hand, Brussels, which imposed liberalization in the energy sector, should in return have made sure to work to build a wholesale market that is not as volatile. And, at the very least, Europe should have left the freedom to each Member State to keep the monopoly system or not. This is what happened in Canada with the provinces and in the United States with their states. Nearly half of these have remained in a monopoly system. “