Overheating in sight for electricity charges

BFM BUSINESS INFORMATION – Electricity prices are rising and there is a risk that household bills will be affected. It could rise to 6% by the start of 2022. The government and the regulator are concerned.

After a 10% increase in gas prices on July 1, electricians are also likely to experience a fever outbreak. On Tuesday, the regulator will announce a slight price increase, less than 1%, for Aug. 1. But the next revision, scheduled for Feb. 1, 2022, is already worrying the government. Electricity market prices also rose 40% to reach € 74/MWh, followed by those for oil and the price of carbon.

The concern is stronger because prices should stay on this upward trend. Some analysts even estimate that they could rise to € 100/MWh by the end of the year. However, it is precisely the month of December which serves as the reference in calculating the price decisions next January and will be applied on February 1, 2022.

So far, specialists estimate that the impact on prices is between 7% and 8%. Considering the end of a catch-up of 1.8% invoice in 2021, tariffs will still increase by 5% to 6% in 2022 compared to this year.

The government is on alert

According to our information, there have been more meetings in recent weeks between the ministerial advisers, Matignon and Elysée to address this topic. With the energy regulator around the table to suggest solutions to limit this sharp rise amid the presidential campaign. “Subject is already very sensitive”, identifies the source near the file. At the Ministry of Ecology, the ball was returned “to the regulator” while acknowledging that “rising electricity prices will have an impact on prices”. “The government remains vigilant about the evolution of prices for consumers” assures the office of Minister Barbara Pompili. At the Ministry of the Economy, we meet at the beginning of the school year to discuss the topic.

Behind the scenes, many solutions are on the table. According to our information, a complex scenario revolves around the ministries that will develop the electricity tax reduction. The “public energy service contribution”, known as the CSPE, weighs one -third of the household bill. It primarily finances subsidies for wind turbines and solar panels. However, increasing market prices will allow the State to provide less assistance to renewable energy operators. This year, the “CSPE” should be worth 5 billion euros against 7 billion last year. “The state can return part of these budget savings to consumers by lowering this tax” deciphers a close source.

lower taxes

The Ministry of Ecology seems to be in favor of this solution, while the Ministry of Economy is dragging its feet as the budget deficit is exploding due to the crisis. Nothing has been decided yet and it won’t be until the fall. If the State accepts this option, it will have to go through a legislative change within the framework of the Finance Act by the end of the year. The subject promises to provoke controversy. At the beginning of 2017, a few months before the presidential election, Ecology Minister Ségolène Royal tried to curb price increases. After a showdown with the regulator, the latter finally had the last word. In this case, the consultation with the government is clear.

The second option is technical and was already introduced in the energy law in 2019. It consists of increasing the amount of electricity that EDF can sell to its competitors (Total, Engie, etc.) at a low price of 42 euros/MWh, i.e. say 40% lower than current market prices. “This will make it possible to lower tension in the electricity market and lower prices” would like to believe a good expert on file. And therefore limit the impact on the French bill to six months. For this, the government just needs to issue a decree. But this will financially penalize EDF, which wants to keep its nuclear power production at a low cost in order to resell it at a high market price. Efforts seem inevitable to prevent such price increases. It remains to be seen whether it will be taken by the State or not EDF.

Matthew Pechberty Journalist BFM Business

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