The evolution of France’s gas and electricity sectors traces the nationalization post-World War II, leading to the establishment of EDF and GDF as monopolies. The shift towards market liberalization began in the late 1990s, with significant reforms separating production and distribution. The introduction of the Arenh mechanism and the transition from regulated tariffs to competitive pricing structures, including the Gaz Passerelle, further transformed the landscape. Current pricing dynamics reflect ongoing adjustments and the establishment of a reference price for natural gas sales.
The Evolution of the State Monopoly on Gas and Electricity in France
Establishment of EDF and GDF
Following World War II, the French government took control of the gas and electricity sectors through nationalization. In 1946 and 1947, two major public companies were formed: EDF (Électricité de France) and GDF (Gaz de France). These entities were granted exclusive rights to produce and distribute electricity and gas, respectively.
As the primary managers of the transportation and distribution networks, EDF and GDF enjoyed their monopolistic status until the early 1990s when European regulations began to foster competition in the energy market.
Transition to Market Liberalization
Over time, France recognized the need to liberalize its gas and electricity markets. In 1999, legislative changes aligned with European directives, culminating in the end of EDF’s monopoly and paving the way for private companies to enter the national market. GDF’s monopoly came to an end in 2000, further liberalizing the gas sector.
Separation of Energy Production and Distribution Management
In 2004, a significant legal change mandated a clear division between:
- Energy production and sales (managed by EDF and its competitors);
- Distribution network management, which was assigned to ENEDIS.
ENEDIS emerged as the principal operator of France’s public electricity distribution network, overseeing the maintenance of approximately 1.4 million kilometers of electrical lines. This separation was intended to foster fair competition within the electricity sector.
In 2007, the government restructured GDF into a joint-stock company through a merger with SUEZ, a private competitor. The new entity, named GDF-SUEZ, retained this name until 2015, when it was rebranded as ENGIE.
The Arenh Mechanism: A New Framework
EDF continued its role in electricity production, now required to sell a portion to its competitors as part of the liberalization process. In 2011, the Arenh (Regulated Access to Historical Nuclear Energy) mechanism was introduced, allowing other market suppliers to access a share of electricity generated from nuclear sources. This mechanism is expected to be phased out by the end of 2025.
Understanding Regulated Gas Tariffs in France
How Tariffs are Determined by the CRE
The Energy Regulatory Commission (CRE) sets gas and kWh prices based on supplier proposals, including those from ENGIE, but the government holds ultimate authority. These proposals consider:
- The cost of gas supply;
- Distribution expenses;
- Applicable taxes;
- Distributor profit margins.
The CRE ensures compliance with relevant regulations by the distributors.
The Process for State-Approved Tariffs
Once the CRE reviews a proposal, it publishes a draft decision that undergoes public consultation, allowing stakeholders (including consumer associations and suppliers) to provide feedback. After incorporating this input, the CRE submits its final decision to the government for approval. Once ratified, the new tariffs are communicated to suppliers and consumers, with monthly revisions based on market fluctuations.
Regulated Gas Contracts vs. Free Offer Contracts
The Shift from Regulated Tariffs to Gaz Passerelle
Historically, many suppliers offered contracts under regulated sales tariffs (TRV), with uniform gas pricing applicable to individual consumers and small condominiums using no more than 150,000 kWh annually. However, as of July 1, 2023, following the Energy-Climate law of 2019, these regulated tariffs have been abolished, transitioning existing gas contracts to the Gaz Passerelle offer, available through Engie or local distribution companies.
Free Tariff Offer Dynamics
In contrast, free offers allow each supplier to set its pricing and terms. Suppliers can establish varying prices based on their specific offerings, operational costs, and market strategies. Free offers are accessible to a wide range of consumers, including:
- Individuals;
- Condominiums;
- Businesses of all sizes;
- Large corporate accounts.
How to Calculate Gas Prices
Gas consumption is measured in cubic meters on the meter, while billing is presented in kWh.
The Role of the Conversion Coefficient
A critical component in determining gas costs in France is the conversion coefficient, which converts cubic meter consumption into kilowatt-hours (kWh) for billing purposes. This coefficient is established by the CRE, using the formula: Consumption in kWh = Consumption in m³ × Conversion Coefficient.
Steps to Calculate Your Gas Consumption
To accurately calculate your gas usage:
- Convert your consumption from cubic meters to kWh.
- Check the kWh price with your gas supplier.
- Multiply your total consumption by the kWh price.
Current Gas Pricing Trends (January 2025)
In France, gas prices undergo regular adjustments, with significant changes typically occurring in April, coinciding with the implementation of new network tariffs and tax updates.
Establishing the Reference Price for Natural Gas Sales (PRVG)
With the discontinuation of regulated gas tariffs on July 1, 2023, the CRE has introduced a reference price for natural gas sales (PRVG), which is published monthly. This price serves as a guideline for consumers, reflecting the costs incurred by gas suppliers and assisting households in navigating the market.