Electricity price spike. In July, the price per kilowatt hour rose by 20%, according to the price index published by the energy offers comparison site Selectra. For the average of the 10% of the most expensive offers, in particular from private distributors competing with EDF, the increase over one month is even dizzying (29.44 euro cents on July 1 against 45.46 euro cents on August 1 , i.e. +54%).
This explosion in prices has caused a jump Fabien Gay, PCF senator from Seine-Saint-Denis. On Twitter, the elected communist castigated, Thursday, August 18, “the liberalization of the energy sector [qui] had to lower the prices”. So, is Fabien Gay right to consider that the opening of the energy market to competition has been a failure?
The liberalization of the energy sector should bring down prices.
The increase in Arenh volume from 100 to 120 MWh was to protect consumers.
Result: 12 million fuel-poor people and the bills of alternative players’ subscribers are exploding…— Fabien Gay (@fabien_gay) August 18, 2022
In an exchange with Agnès Pannier-Runacher, Minister for Energy Transition, the senator clarified the subject of his criticism: regulated access to historical nuclear energy (Arenh), the mechanism that has made EDF’s opening up to competition permanent. To understand this system, you have to go back to 2010, when the Nome law (New organization of the electricity market), which governs the Arenh, was put in place.
Pursuant to a European directive imposing the implementation in France of real and fair competition between electricity suppliers, the Nome law undertook twelve years ago to challenge EDF’s dominant position in the energy market.
Although the liberalization of the sector began in 1999, the public operator still has in 2010 a historic advantage over all its potential competitors: “A largely amortized nuclear fleet, that is to say paid for by the French since the 1970s”, exthe economist Jacques Percebois, an energy specialist, told franceinfo. “EDF’s competitors could not compete because they sold electricity produced from oil or gas. However, electricity from fossil fuels was more expensive than nuclear electricity.summarizes the director of the Center for Research in Economics and Energy Law (Creden).
To counterbalance this advantage, the Nome law introduced the Arenh system, which obliges EDF to sell a quarter of its production (nearly 100 terawatt hours) to its competitors at cost price. The incumbent energy supplier is thus forced to sell a large quantity of its nuclear electricity to the competition at a regulated rate rising since March 11 to 46.20 euros per megawatt-hour, a price broken in relation to the market, where the megawatt hour traded on August 22 at more than… 600 euros.
In return for this subsidized price, the competing operators have undertaken to pass on the discount granted in their tariffs to the consumer. With the objective, according to a press release from the Council of Ministers published in 2010, “that any supplier be able to offer a competitive price to its customers”.
But for Fabien Gay, the operators “don’t play the game” and not “reflect” not the tariff reduction that the Arenh gives them. The senator deplores, for example, having received several reports against Ohm Energie, a private distributor who “will increase [le prix] of its subscriptions by 60% in September“, according to him. The law for purchasing power passed in July has yet further improved the conditions offered to the private sector by increasing the volume of Arenh from 100 to 120 terawatt hours.
Contacted by franceinfo, the cabinet of Agnès Pannier-Runacher does not note, for the moment, any significant shortcomings on the Arenh. According “the Energy Regulation Commission (CRE)”the agency responsible for monitoring the market for energy suppliers, “the vast majority of consumers are protected, the suppliers having passed on the price shield and the provision of additional volumes of Arenh in 2022”. However, the Ministry for Energy Transition specifies that “the minister asked the CRE to examine cases relayed on social networks (to) ensure compliance with the rules of the game.“
For his part, François Joubert, general manager of Ohm Energie, defends himself to franceinfo from any “scam” but confirms a “high price increase, around 60%”. The boss of this electricity supplier justifies this increase by “market conditions” never seen since “thirty years”with a price per megawatt-hour reaching “1,000 euros for this winter” (in its latest report published in July, CRE declares a price per megawatt hour at 918 euros for the first quarter of 2023).
“From August 2021, prices have soared”confirms Jacques Percebois, due to “the economic recovery in China and around the world” which leads to a “high demand for electricity”. Not considering “Nuclear is not there” with “half of the power plants shut down” in France, in particular because of maintenance problems. To this must be added the war in Ukraine which raises fears of a risk of shortage of gas, used for the production of thermal power plants.
However, the Arenh system is not intended to fully protect private suppliers from price fluctuations on the energy market. Arenh’s demand from operators, around 160 terawatt hours, is in fact higher than the legal ceiling set by the public authorities (120 terawatt hours). In fact, the Arenh, with its reduced rate, only covers “50% of consumption” customers of private suppliers, explains Jacques Percebois. This therefore forces these operators to provide half of the wholesale market, where prices have exploded. But while the current inflation is largely caused by market conditions, it also appears that the Arenh has not performed as expected due to some effects “pervert”according to the economist.
In 2011, the stated objective of the public authorities is not only to promote the emergence of alternative suppliers to EDF, but also to encourage them to become energy producers, in particular by investing in new power plants or other of electricity production. But, for the most part, “distributors have not played the game. Apart from Engie and Total Energie, private operators have not increased their production capacity”laments Jacques Percebois.
This lack of investment explains “that today we are under capacitye“says the economist. “We can clearly see that the competitors [d’EDF] are simply traders who buy and sell their electricity without installing production power which would have made them real market players”comments for his part Alain André, Secretary General of FO Energy and Mine.
Another harmful effect: the increase in the volume of Arenh from 100 to 120 terawatt hours, confirmed during the vote on the law for purchasing power in July, will be very expensive for EDF. The public supplier must now buy, on the market, the additional 20 terawatt hours requested, at a price of 257 euros per megawatt hour. To then be forced to resell them to its competitors at the regulated price of 46.20 euros. To cover its losses, EDF is claiming compensation from the State amounting to 8.34 billion euros, according to a press release published on August 9. A situation “crazy woman” which makes the Arenh a system “completely abstruse”judge Fabien Gay.
The Ministry of Energy Transition, however, estimates that the increase in Arenh’s volume has “enabled to limit the quantity of energy purchased by alternative suppliers on the markets and thus reduce the increase passed on to their customers’ electricity bills”. The fact remains that by not developing their own production capacities, EDF’s competitors, which are in some way subsidized by the historic French supplier, are contributing to the current shortage of electricity and therefore to price inflation.
“When you resell the same product twice through intermediaries, you have [mécaniquement] a price increase“recalls Erwann Tison, liberal economist at the Sapiens Institute, who wonders, like others, about the merits of opening up this market to competition.