France: The end of the tariff shield leads to a 14% decrease in electricity bills

Despite the end of the tariff shield on February 1, French households will benefit from a 14% reduction in their electricity bills. This measure is tied to the absence of adoption of the 2025 budget, which nevertheless has side effects.

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With the scheduled end of the electricity tariff shield on February 1, households subject to the regulated sales tariff (TRV) will see their bills decrease by 14%. This significant reduction is made possible by the decision to abandon the tax increase on electricity initially planned in the 2025 budget proposal.

According to a recently published decree, the tax on electricity (excise) will return to its pre-crisis level, adjusted for inflation, at €33.70 per megawatt-hour for households, compared to the current €22. If the tax increase proposed by the government had been adopted, it would have limited the bill reduction to 9%. This measure sparked heated debates in Parliament, with opposition from various political parties such as the National Rally (RN) and France Insoumise (LFI).

Economic consequences for households and businesses

For small and medium-sized enterprises (SMEs) also subscribed to the TRV, the excise will rise to €26.23 per megawatt-hour. This measure will mitigate financial impact and allow them, like households, to benefit from the drop in electricity prices on international markets. This decline primarily stems from the stabilization of energy prices after the sharp tensions recorded in 2022 and 2023.

However, some negative effects are anticipated. The absence of a 2025 budget could lead to higher taxes for millions of households due to the freezing of the inflation-indexed tax scale. Additionally, several social and sectoral measures remain suspended. Aid for farmers, the textile sector, and ultramarine regions is uncertain, as are the announced reductions in VAT for Martinique and Guadeloupe.

A temporary special law in effect

While waiting for a possible budget vote, a “special law” will apply starting in January. It allows the government to manage public finances based on the 2024 budget. This situation imposes significant limitations, such as postponing certain budgetary commitments, but offers temporary advantages such as maintaining the disindexation of pensions or avoiding the dereimbursement of certain medications.

For employees, another major drawback could arise in January: the end of the use of meal vouchers for grocery shopping. This measure could directly impact the purchasing power of many households.

Ultimately, the coming months will be decisive in assessing the overall impact of these adjustments on the economy of households and businesses. François Bayrou, president of the MoDem, wishes for the budget to be adopted by February, but a new censure could prolong the uncertainty.

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