On Tuesday, the French government announced a 10% increase in regulated electricity tariffs on August 1, marking the gradual end of the tariff shield introduced two winters ago to reduce French consumers’ bills.
Electricity tariff hikes: French households affected by the end of the tariff shield
This foreseeable increase concerns customers “connected to a meter with a power rating of up to 36 kilovoltamperes”, i.e. households, craftsmen, small businesses and tradesmen; large companies do not benefit from the tariff shield. The last increase was 15% in February, after 4% in February 2022.
Since 2021, the regulated electricity tariff, on which some 23 million customers depend, will have risen by 31%.
“Before the increase (of 10%, editor’s note), the bill was around 1,640 euros per year. After the increase, it will be 1,800 euros”, for an average electrically-heated consumer consuming 7 MWh per year, an increase of 160 euros on average, the government calculates. “From August 1, the tariff shield will continue to cover the protection of French people at more than a third of their bill, on the order of 37% of the electricity bill, which continues to be the level currently covered, which is on the order of 43%”, according to the government, which insists that electricity tariffs in France will remain among the lowest in Europe.
The bill could have been even higher, as the Commission de régulation de l’énergie (CRE) recommended a 74.5% tax-inclusive rise in energy costs, but the government opted to limit the increase to 10%.
According to estimates by the French Energy Regulatory Commission (CRE), electricity prices would have jumped by 35% in 2022 and 100% in 2023 had it not been for the protective tariff shield. According to the French Energy Regulatory Commission, some 21.6 million residential customers (out of 34 million) benefited from the regulated electricity tariff on December 31, 2022. In addition, 1.5 million small non-residential customers were on the regulated tariff at the same date.
French government plans to phase out energy tariff shield
The increase announced on Tuesday comes as no surprise. French Economy Minister Bruno Le Maire announced in April that he would put an end to the tariff shield on electricity prices, announced in autumn 2021 by Prime Minister Jean Castex to combat the energy inflation that was beginning, even before the war in Ukraine.
“As soon as we have to make savings, we have to get out of the specific arrangements we put in place during the inflation crisis”, “that means we’ll have to gradually get out of the tariff shield on energy prices”, by 2024, had recently confirmed Minister Delegate for Public Accounts Gabriel Attal on RTL.
The price of electricity depends largely on the price of natural gas in Europe. The reference price of gas on the continent, historically below 20 euros per MWh, rose to over 300 euros in the summer of 2022, but has now largely fallen back to around 25 euros. On Monday evening, the government referred the issue of regulated electricity tariffs to the Conseil supérieur de l’énergie (CSE) for its opinion on the forthcoming price increase.
Electricity tariffs are revised twice a year, in August and February, so the next increase is scheduled for February 2024. The energy shield is very expensive for the State. The government has estimated its cost at the end of 2022 at 110 billion euros between 2021 and 2023. According to Bercy, the reduction in the electricity and gas tariff shield will result in savings of nearly €14 billion in the 2024 budget, in addition to the end of the “guichet d’accompagnement” scheme for energy-intensive businesses.
