Conflicting views have emerged regarding regulated electricity tariffs in France. The competition authority advocates for phasing out these tariffs to enhance market competition, while the Energy Regulatory Commission supports their continuation for five more years amid rising energy prices due to the Ukraine war. Despite cheaper market options, many consumers remain with regulated tariffs for their price stability. The government is preparing a report for the European Commission, weighing the implications of these recommendations against consumer protection needs.
Conflicting Recommendations on Regulated Electricity Tariffs
On Tuesday, the competition authority suggested that the government should prepare for a transition away from the regulated electricity tariffs (TRVE), which many households depend on to shield themselves from the volatility of the energy market. This stance stands in opposition to the Energy Regulatory Commission (CRE), which is in favor of maintaining these tariffs.
The competition authority argues that TRVE, whose prices are determined by governmental bodies at the CRE’s suggestion, “hinders the growth of competition within retail markets.” They believe that regulated tariffs “capture a significant segment of the demand” from both individuals and businesses, effectively excluding them from competitive dynamics. As a result, the authority recommends “taking concrete steps to phase out TRV” while still achieving the public policy goals associated with these tariffs by utilizing more targeted approaches.
Support for Maintaining Regulated Tariffs
In contrast, the Energy Regulatory Commission (CRE), which oversees the smooth operation of the French energy markets to benefit consumers, advised the government to “retain the TRVE system for five years.”
The recommendation comes in light of the energy crisis exacerbated by the Ukraine war, which has significantly inflated energy prices and has been a focal point in recent political debates. The CRE highlighted that “smoothing” prices “over an extended period is vital for alleviating the effects of market fluctuations.”
Electricity prices have surged by over 43% in the past two years due to the aftermath of the Covid pandemic and the ongoing war, despite a protective price shield implemented by the government. However, consumers benefiting from regulated or indexed tariffs are expected to see a notable decrease of around 9% in their bills starting February 1, 2025, thanks to a reduction in electricity prices, even as a tax increase and the end of the price shield loom.
According to a recent Odoxa survey commissioned by Voltalis, an energy savings specialist, the average French household has experienced an increase of approximately 213 euros in their energy bills this year.
The Importance of Regulated Tariffs for Consumers
Currently, “only the TRVE provides the smoothing effect” for the 59% of French residential consumers enrolled in these tariffs, along with the 16% who have opted for offers indexed to regulated tariffs, as per the CRE’s estimates. Despite the availability of “significantly cheaper market options (up to 15 or 20%)” recently, there has been a “low mobility of customers from TRVE to market offers,” indicating that “price is not the sole factor influencing consumer choice.”
The CRE underscores the “critical role” these tariffs play “in favor of consumers” and asserts that the prices set by public authorities, based on CRE’s recommendations, “are compatible with the efficient functioning of the market and the promotion of competition.”
The Energy Minister, Olga Givernet, acknowledged the contrasting conclusions of the two authorities in a press statement. The government is tasked with drafting a report for the European Commission, considering the impending discontinuation of the Arenh mechanism, which was negotiated with Brussels to foster competition against EDF and ensure the availability of alternative electricity suppliers.
While Givernet refrained from commenting on the future report’s findings, she stressed the “strong” commitment of the French populace and national representatives to regulated tariffs, which are deemed essential for the effective functioning of the market, particularly in light of the ending of Arenh. François Carlier, an expert at the consumer association CLCV, predicts that the French State will advocate for the preservation of TRV in its response to Brussels. He also highlights the potential “political risk” tied to abolishing these protective tariffs, especially with the presidential election of 2027 on the horizon, anticipating a status quo from Europe on this matter.