Fshould he maintain “stable and fair electricity tariffs for all consumers” and open “a great European debate” on the electricity market, as proclaimed by economists, politicians and representatives of associations and civil society in a forum at the World put online on April 27 (“France must guarantee its public electricity service”)?
These objectives are laudable and one can only subscribe to them. But should we therefore call for a return to a state monopoly, and designate competition as the main culprit for the rise in prices? This story of a golden age that would have been lost needs to be contextualized to lay the foundations for a constructive debate, commensurate with the issues affecting the electricity sector.
EDF’s monopoly on the production and distribution of electricity is, in this story, described as the guarantee of price stability. Such a statement ignores key moments in the history of the sector and therefore presents a largely truncated version of it. For example, between 1973 and 1985, despite the monopoly, electricity costs in France increased by 200% with peaks of +16.7% in 1974 and +22% in 1980 following the two oil shocks.
With liberalisation, the other reason for the current price rise would be marginal cost pricing – that is, the production cost of the last plant called, the most expensive, which is often a gas-fired plant.
However, the use of this method of pricing has little to do with liberalisation. It was theorized and implemented by Marcel Boiteux, CEO of EDF from 1967 to 1979. The objective has always been to promote a balance between supply and demand by sending a price signal to consumers and by imposing a consideration of the finite nature of energy resources.
Shortage of production
This pricing method would not have such an inflationary effect if the electricity market did not experience a production crisis linked to the unavailability of nuclear power due to reactor shutdowns for maintenance, hydropower due to drought, as well as the invasion of Ukraine. To deny the impact of this shortage of production amounts to focusing on the consequences of the crisis while ignoring its causes.
Finally, the liberalization of production has been very useful: since 2007, when the market was liberalized, 85% of new means of production have been installed by private producers. How high would prices have gone if this private production had not been rolled out?
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