As wholesale energy prices soar across Europe, France might be expected to be shielded from such pressures by their nuclear power industry, which is capable of producing up to 80% of their needs.
Nevertheless, under European regulations the price of electricity in France is in part indexed to prices in the wider European market and nuclear power generation in France is also operating at reduced capacity due to maintenance being carried out on 14 of their 56 reactors. That has meant that EDF has had to buy electricity on the open market.
With residential consumers facing the possibility of a price increase of up to 35%+, according to the French energy regulator, the French government have instructed EDF to keep the increase in the regulated tariff to 4%, effective 1st February until the end of the year. The cap will also apply to business consumers.
A similar cap has been put in place for gas prices, for which the regulated tariffs have been frozen at their October 2021 level for winter and, if necessary, until the end of 2022.
However, with nearly one-third of the population using a private supplier, the government have also been forced to intervene in this market, by requiring EDF to increase by 20% the volume of electricity they sell to the suppliers. EDF will now be selling around 40% of the electricity it generates to its competitors, at a fixed price industry experts consider will incur a loss for the company.
The government have stated that the private suppliers will be required to pass on the advantage gained to consumers although some suppliers have already stated there will need to be a price increase.
Union representatives of EDF employees have reacted to this decision by calling for industrial action, in the face of what they see as "the destruction of EDF".
The cost of the cap will be borne by EDF not the State. As a result, the impact on EDF’s profit is estimated at circa €8 billion, and the share price of the company fell substantially following the announcement. EDF are 84% owned by the French government.
Separately, the government have reduced the level of one of the taxes consumers pay relating to electricity, called the "Taxe intérieure de l'électricité (TICFE), at a cost of €8billion to the public purse. These taxes now make up around one-third of consumers electricity bill. The reduction is for one year.
The government have also provided direct cash assistance to in the form of an additional one-off energy voucher of €100 to around 6 million households who already benefit from cash support for their energy bills, under a scheme of assistance called 'Chèque énergie'. The support is in addition to the assistance of €150 provided last year.
Separately, they are also in the process of distributing a similar one-off payment of €100 (called 'Indemnité inflation') to 38 million individuals whose net monthly income is less than €2,000.
The payment is being made to cover the general rise in the cost of living, notably food and fuel, in what looks like a rather badly disguised handout ahead of the presidential elections in April. The government rejected a reduction in the fuel tax.
Under the scheme, a couple would be eligible if their joint income was below €4,000 per month, provided their individual income was no greater than €2,000. Many millions have already received their payment, but distribution will continue until the end of February.
The total cost of these measures of protection is estimated to be €20 billion. The government have stated that it will not be their intention to recover the costs by large price increases in electricity 2023, which will be absorbed by EDF and the State. That is a promise industry experts in France have stated it will be difficult to keep, due to a combination of budgetary pressures and a continued rise in market prices.
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