“Difficult Decision”
France lowers electricity price brakes
January 22, 2024, 5:48 p.m
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Since the Russian attack on Ukraine, the state in France has ensured that energy costs do not skyrocket. Now the government in Paris is letting the electricity price brake expire. Consumers will have to pay up to ten percent more from February.
In France, people have to prepare for higher bills because of the winding down of the electricity price cap. From the beginning of February, electricity costs for households and small businesses rose by 8.6 to 9.8 percent, said the Ministry of Economic Affairs in Paris. As a result, the costs rose by 4.50 euros per month for a one-person household, by 17.80 euros per month for a four-person household with electric heating and by 116 euros per month for a bakery. The electricity price brake should then be completely lifted in a year. The energy price brake for gas had already expired in the summer.
Economy Minister Bruno Le Maire spoke of a difficult decision, but one that was necessary for the ability to invest in new electricity generation capacities. During the energy price crisis, France reduced taxes on electricity to a minimum and, according to the ministry’s calculations, covered 37 percent of the actual costs for consumers and companies. This meant billions of euros in burdens for the already ailing French public finances. According to the ministry, the limited continuation of the electricity price brake will result in three billion euros in reduced revenue in the state budget in 2024.
Generous cap since 2022
After the Russian attack on Ukraine, the prices of electricity and gas for private households in France were generously capped with the help of the “bouclier tarifaire”: suppliers were only allowed to increase electricity prices by four percent in 2022 and by a maximum of 15 percent in 2023, The French state paid the difference.
A complicated mechanism also helps to cushion electricity prices in France, in which the French state-owned energy company EDF has to sell part of its cheap nuclear power to other suppliers at below market prices. Private electricity customers, but also companies, benefit from this. There is therefore concern in Germany that French electricity market regulation is distorting competition.