Overheating in view of electricity tariffs

BFM COMPANY INFO – Electricity prices are sky-high and risk affecting household bills. It could rise to 6% in early 2022. The government and the regulator are concerned.

Following the 10% rise in gas prices on 1 July, electricity prices are also likely to suffer from a fever outbreak. On Tuesday, the regulator will announce a small price increase, less than 1%, for 1 August. But the next revision, scheduled for February 1, 2022, already worries the government. Prices in the electricity market also increased by 40% to 74 € / MWh in the wake of oil and carbon prices.

The concern is so much the stronger that prices should remain 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 that serves as a reference in the calculation of the prices to be decided next January and applied on 1 February 2022.

To date, specialists estimate that the impact on prices will be between 7% and 8%. Taking into account the completion of a catch-up of 1.8% invoiced in 2021, tariffs will still increase by 5% to 6% in 2022 compared to this year.

The government on alert

According to our information, the meetings between ministerial advisers, Matignon and the Elysée have multiplied in recent weeks to address this issue. With the energy regulator around the table to propose solutions to curb this sharp rise in the midst of the presidential campaign. “The subject is already very sensitive”, recognizes a source close to the file. At the Ministry of Ecology, the ball is returned “to the regulator”, at the same time as it is acknowledged that “the increase in electricity prices will have an effect on prices”. “The government remains vigilant over developments in consumer prices,” assured Minister Barbara Pompili’s office. In the Ministry of Economic Affairs, we meet at the beginning of the school year to discuss the topic.

Behind the scenes, several solutions are on the table. According to our information, a complex scenario is circulating in the ministries, which would consist of lowering the tax on electricity. The “contribution to the public energy service,” known as the CSPE, weighs one-third of the household bill. It mainly finances subsidies for wind turbines and solar panels. However, the increase in market prices will allow the state to pay less support to renewable energy operators. Already this year, “CSPE” was to cost 5 billion euros against 7 billion last year. “The state could return part of this budget savings to consumers by lowering this tax,” suggests 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 because the budget deficit is exploding due to the crisis. Nothing has been decided yet and will not be until the autumn. If the state accepted this option, it would have to go through a change in the law within the framework of the Finance Act at the end of the year. The topic promises to create controversy. Already in early 2017, a few months before the presidential election, Minister of Ecology Ségolène Royal had tried to block a price increase. After a break with the regulator, the latter had finally got the last word. This time, consultation with the government is already clear.

The second option is technical and was already introduced in the Energy Act 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, ie. . 40% less than current market prices. “This would make it possible to lower the tension in the electricity market and to lower the prices”, a good connoisseur of the matter will believe. And therefore to limit the impact on the bill of the French for six months. For this, the government only needs to issue a decree. But this would penalize EDF financially, which wants to keep its nuclear power generation at low cost in order to resell it at the high market price. Efforts seem inevitable to avoid such a price increase. It is still unknown whether it will be borne by the state or not.

Matthew Pechberty Journalist BFM Business

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