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EXPLAINED: Why are French energy prices capped?

As energy prices soar around Europe, France is the notable exception where most people have seen no significant rise in their gas or electricity bills - so what lies behind this policy? (Hint - it's not just that the French would riot if their bills exploded).

EXPLAINED: Why are French energy prices capped?
French electricity and gas prices are capped. Photo by PHILIPPE HUGUEN / AFP

On most international comparisons of rising energy prices, France is the outlier – but the government control of energy prices is not in fact a new policy and was in place well before the Russian invasion of Ukraine sent gas and electricity prices soaring.

At present prices for domestic gas are frozen at 2021 levels and electricity prices can only increase four percent per year. According to economy minister Bruno Le Maire, without these measures French bills would have risen by 60 percent for gas and 45 percent for electricity.

Both these measures – collectively known as the bouclier tarifaire (tariff shield) – are in place until at least the end of 2022, and could be extended into 2023.

The extension of the price shield was confirmed by parliament earlier in August – part of a €65 billion package of measures aimed at tackling the cost-of-living crisis – but had been in place for much longer.

Tariff shield

The reason that gas prices are frozen at 2021 levels is that the freeze came into effect on November 1st 2021 – well before Russia’s February 2022 invasion of Ukraine.

The measure was initially put in place to help people deal with the economic after-effects of the pandemic, but was extended in the spring of 2022, when electricity prices were also capped at four percent.

Price regulation

But although prolonged price freezes are unusual, the French government involvement in price-setting is completely normal and during non-freeze periods, a rate is set each month.

If you read French media (or The Local), you’ll notice regular articles on ‘what changes next month’ which include gas and electricity prices, usually expressed as a month-on-month percentage rise or fall. This refers to the maximum rate that utility companies are allowed to increase their charges per month.

The government-set rate refers to the basic price plan from EDF. Some people are on special deals or time-limited tariffs, so if their deal or payment plan ends and they go back onto the basic rate, they can see a rise above the government rate.

Around 85 percent of households in France get their electricity from EDF. 

READ MORE: Reader Question: Why did my French electricity bill increase by more than 4%

State-owned utilities

So, why is the government involved? Well, it’s the majority stakeholder in EDF, the country’s largest electricity supplier, and owns Gaz de France (Engie). 

At present EDF isn’t completely state owned – although there are plans to fully nationalise it – but it owns 84 percent.

The French state owns a lot of service and utility companies including the country’s rail provider SNCF, postal service La Poste and France Télévisions. One notable exception is the country’s autoroutes, which are run by private companies, although the government sets limits on toll charges. 

Nuclear 

France is less exposed to energy shocks than some other European countries because of its nuclear sector.

It is unusual among European nations in the size of its nuclear industry – around 70 percent of electricity comes from its own domestic nuclear power plants, although during the heatwave several plants have had to lower output as rivers have become too hot to effectively cool the reactors. There are also ongoing technical issues that have seen some of the older plants shut down or forced to lower output.

READ ALSO Why is France so obsessed with nuclear?

France is usually a net exporter of electricity, but at peak times it has to import electricity, usually via the high-priced international spot market.

It does, however, import its gas, mostly via pipeline – in 2020 its biggest supplier was Norway, followed by Russia.

The French government has launched a sobriété energetique (energy sobriety) plan to cut its total energy consumption by 10 percent this year, which it hopes will allow it to get through the winter without Russian gas. 

Riots

Even before the recent €65 billion aid package, the French government was taking a pro-active role in helping people deal with rising prices – from the price shield to fuel rebates for drivers, €100 grants for low-income households and financial aid for industries such as agriculture and logistics so they could avoid passing prices on the consumers.

Cynics say this happened for two reasons – because there were elections in April and June and because the French would riot if their utility bills suddenly doubled.

There’s a kernel of truth in both – cost of living became a major issue in the April presidential elections and one that far-right leader Marine Le Pen very much made her own from early in the campaign, leaving Emmanuel Macron slightly on the back foot, although in truth his government had already introduced several measures to ease the burden on ordinary voters.

It’s also true that the French have a robust approach to holding their government to account, and high living costs have previously inspired noisy and sometime violent protests – the ‘yellow vest’ movement of 2018 and 19 began as a protest over living costs.

But it’s also true that the French State is generally quite involved in people’s everyday lives – as evidenced by those monthly gas and electricity price rates – and taking a laissez-faire approach such as that seen in the UK would be unusual for any French government, even outside of election season.

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STRIKES

‘We can’t work until 65’: Why French workers are ready to battle pension reform

French workers took to the streets across the country on Thursday in an effort to fight for higher wages and to decry proposals by President Emmanuel Macron's government to raise the retirement age.

'We can't work until 65': Why French workers are ready to battle pension reform

The protest in Paris was one of around 200 around the country on Thursday but only drew around 40,000 marchers.

It could be seen and heard from far away, as drums were banged and chants were sung, marchers made their way towards the historic Place de la Bastille.

The chants of “SMIC à €2,000” (minimum wage at €2,000) and “Rétraite à 60 ans” (retirement at 60 years old) were repeated over and over.

Originally Thursday’s inter-union protest – representing workers from several sectors – intended to demand higher wages amid the cost of living crisis, but the mobilisation quickly shifted to focus equally on denouncing plans by President Emmanuel Macron’s government to push through pension reform. 

Protests occurred as the French government vowed on Thursday to push through the reform by the end of the winter. 

Macron made raising the retirement age from its current level of 62 one of the key planks of his re-election campaign, arguing that the current system was unsustainable and too expensive.

But opposition parties have vowed to fight the government all the way.

“It’s the start of a social battle,” leading left-wing MP Alexis Corbiere from the France Unbowed (LFI) party told AFP as he took part in a protest march of tens of thousands in Paris. “My hope is that this is the starting point.”

While there were some notable absences from the march in Paris, namely the largest union in France, CFDT, those present were keen on making their voices heard, particularly in regard to their plans to continue protesting should Macron push on with his plan to raise the retirement age.

“There is nothing wrong with the system as it is,” said Fréderic Aubisse, a sewage operator in Paris and former head of the waste treatment union with CGT. For Aubisse, the problem of salaries and retirement are connected – he sees current salaries as too low and unattractive.

“We just need more people paying into the system,” the former union head said.

For waste treatment workers, the subject of retirement is particularly sensitive.

“We [waste treatment workers] already have a low life expectancy,” he added, explaining that pushing retirement back even further is not sustainable for people in his line of work. In Aubisse’s view, many would die before getting to enjoy any benefits of retirement.

According to Libération newspaper, waste treatment workers in France do have an excess mortality of 97 percent. 

Aubisse said he has been fighting for at least thirty years to keep social protections from being eroded, and that he and members of his union would continue protesting.

“If it makes it through parliament, it will be too late. We must start taking action now.” 

Another demonstrator, Dominique, who has been employed as cash register worker for Carrefour supermarkets for 35 years, said for her it would be “like 2019 again.” 

Dominique was referring to the 2019-2020 pension reform strike – the longest industrial action in French modern history. The Carrefour worker said she would be prepared to go to such lengths once more.

“Many of us here today have painful, repetitive jobs. We cannot continue to the age of 65,” said Dominique.

With deficits spiralling and public debt at historic highs, Macron views pushing back the pension age as one of the only ways the state can raise revenues without increasing taxes.

He has made it clear he would not hesitate to call fresh elections if opposition parties voted down the government over the reform.

Maintaining the focus on salaries

Some protesters in Paris on Thursday remained firm in the original motive of the protest to focus on demanding higher wages. The inter-union group, largely represented by the union CGT, called for for salaries to be indexed at a rate of at least 10 percent for civil servants.

The government previously increased the rate by 3.5 percent, but unions said that this “falls short of the urgent need to raise all salaries” and “preserve living conditions of all.”

Whilst the strike on Thursday caused some disruption on public transport and rail services, around one in 10 teachers joined the action forcing many schools to close their doors.

Teachers – a well-represented group at Thursday’s protest in Paris – were adamant wages must increase further.

“[The government’s 3.5% increase] is not enough. It does not suffice,” said Clotilde, an elementary school teacher in the Paris region.

Wearing a sign on her back with the words “20 years in teaching, but still a salary of a student,” Clotilde said it is “extremely difficult to live in the Paris region as a teacher.”

Clotilde’s sign. Picture Credit: Genevieve Mansfield

For her, the government’s proposals did not adequately cover the costs of inflation, a sentiment which was echoed by fellow teacher Aina Tokarski.

Tokarski, a middle school teacher in Villejuif, also wore her sign on her person. 

Tokarski holding up her sign

Tokarski explained that the start of the 2022 school year shook her – a young teacher, she saw several colleagues leave the profession, and she too considered making some changes, such as moving to a more affordable region in France.

“When I get to the grocery store, I look at the prices and just think to myself: this is not possible,” she said.

For her, the government has not raised salaries enough to combat the cost of living crisis.

In addition to rising costs, Tokarski worries about the conditions in the public school system generally. “The start of the school year really concerned me. We have teachers with upwards of 30 students per class. That is unattainable. It has been getting worse since the pandemic,” she said. 

While it was not a focus of the protest, other public employees highlighted staff shortages as deeply concerning, and innately related to salaries.

Véronique, a speech and language pathologist who works for the public hospital system, said she was there to “defend our salaries.”

Wearing a white doctor’s coat, Véronique explained that low salaries have pushed several doctors in her sector to leave their jobs, adding that this shortage has led to wait-lists growing far too long:

“It is not right for a four-year-old child who cannot speak to have to wait at least a year or two years to see a specialist. We have to triage our patients now,” she said.

When asked if she had plans to protest again, Véronique gave an emphatic “Bien sûr” (of course).

Xavier Signac, a 48-year-old member of the UNSA union from southwest France, as he walked along with a flag in Paris told AFP: “It’s up to us to show our determination, to show that street protests still have some power.”

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