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France set for sharp rise in electricity prices

The price of electricity in France is set for a steep five-percent rise in August, followed by a further increase of five-percent at the same time next year, France’s new environment minister announced on Tuesday.

France set for sharp rise in electricity prices
Photo: Luc Jardon

The first five-percent hike will come into effect on August 1st, Philippe Martin, France’s new minister for ecology and energy, announced on Tuesday.

This will be followed by another five-percent increase in August 2014. The rises are to help fill a gaping hole in national energy provider EDF's coffers.

For households using electricity to heat their homes, the sharp price hike is the equivalent of €35 to €50 on average on the annual bill.

Over the next five years, bills are set to rocket by 30 percent, according to a report in February by France’s energy regulator, the ‘Commission de regulation de l’energie’ (CRE).

French consumers, accustomed to one to two-percent annual increases in electricity price in recent years, will be bracing for the sharp rise in the cost of heating and running their homes.

Martin defended his decision to impose price rises spread over two years by saying it was being done to protect consumer spending power.

The government has decided to protect household spending power as much as possible by smoothing out over several years the rises needed to cover the EDF’s costs, as provided for by the law – See more at: http://www.connexionfrance.com/Electricity-bills-EDF-Martin-14853-view-article.html#sthash.8SYZGTo6.dpuf

However the announced price hikes have been criticized by France's consumer rights groups.

UFC-Que Choisir said it "bitterly regretted the cavalier announcement",and that it Martin ignored "the measures demanded by consumers."

The association demanded that the minister organized a "crisis meeting with all interested stakeholders".

The unusually steep increase is however still lower than the 6.8 to 9.6 percent originally called for by the CRE, which has lamented France’s failure to fill a gap in the balance sheet of EDF, the world’s largest producer of electricity, which is based in Paris.

It’s not all bad news for French consumers, however. 

Energy minister Martin also announced on Monday that those with a low-power electricity set-up (three to six kilovolt-amperes) would enjoy a decrease in prices, though that decrease was not detailed.

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ENERGY

Why are electricity prices in France set to jump (yet) again?

After just a brief reprieve, electricity prices in France are set to jump once again in August. So, why is this happening?

Why are electricity prices in France set to jump (yet) again?
Illustration photo: AFP
At the beginning of August, the price of electricity will increase by 1.2 percent after a previous jump of 5.9 percent took place just two months ago, in June. 
 
So, why have two price hikes been scheduled in such a short space of time?
 
Well, it seems the reason for the short space between the two hikes is all down to the 'yellow vests' – or at least French President Emmanuel Macron's response to their demands. 
 
That's because the increase on June 1st was originally scheduled for February 1st – right in the middle of the 'yellow vest' crisis – before the government decided to push it back in an attempt to appease the demonstrators.  
 
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France's energy regulator (CRE) sets the regulated prices of electricity every six months – in winter and in summer – and this time both hikes will take place within just a couple of months of each other. 
 
“We will have had both shots at once,” Fanny Guinochet from L'Opinion told Franceinfo
 
“The price hike was expected. We can just console ourselves by saying that August's will be less significant than the one we just had,” she said, referring to the fact that the June hike was almost 6 percent compared to the August increase of 1.2 percent. 
 
According to Guinochet, this hike will represent an increase of around €18 extra every year on average for a home that has electric heating. That's after an annual increase of €85 brought in by the previous hike. 
 
“This is one of the strongest increases recorded,” said Guinochet. 
 
The government is also hoping that by rushing through this new increase in summer people will find it easier to swallow.
 
But, why is the increase happening at all?
 
As is often the case, the price hike is primarily due to rising taxes – in this case the TURPE tax (Tarif d'Utilisation des Réseaux Publics d'Electricité). 
 
However it is also linked to several other factors, including supply costs, and changing energy prices on the wholesale markets, which are very variable. 
 
On a more positive note for consumers, the French government wants to stabilise the cost of electricity by 2020 as part of its new energy bill, which would mean a “change to the method used to calculate electricity tariffs”, according to the French Minister for the Environment François de Rugy.
 
“I want to give the French a form of price stability related to the stability of the cost of electricity production by nuclear power plants,” he said, adding that 70 percent of France's electricity is produced by nuclear power stations. 
 
This means that the cost of electricity should be “fairly stable” and “fixed by law”, said the minister, explaining that if French power giant EDF and its competitors have access to fixed-cost nuclear electricity the number of price hikes should be limited. 
 
Today, the regulated electricity tariffs, applied by EDF to around 25 million households, are set by the French Energy Regulatory Commission, according to a complex calculations, which take into account the evolution of the wholesale market price.
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