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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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POLITICS

Macron’s chief of staff charged with conflict of interest

The top official in French President Emmanuel Macron's office has been charged with a conflict of interest, the chief financial crimes prosecutor said on Monday.

Macron's chief of staff charged with conflict of interest

The move against Alexis Kohler, who holds one of France’s most powerful jobs as Elysee secretary-general, came hours after another Macron ally, Justice Minister Eric Dupond-Moretti, was ordered to stand trial in a separate case, also over a conflict of interest.

Kohler is accused over his professional and family links with Italian-Swiss shipping company Mediterranean Shipping Company (MSC) which is run by his mother’s cousins, prosecutor Jean-Francois Bohnert said in a statement.

On Monday, Kohler “categorically denied any wrongdoing”, his lawyer said, while an official in Macron’s office said Kohler remained in his post.

In 2018, Anticor, an anti-corruption NGO, filed a legal complaint against Kohler for illegal influence-peddling concerning contracts awarded to MSC in 2010 and 2011.

Kohler allegedly failed to reveal his family connections with MSC to the French agency for public investment where he worked at the time.

The case was dismissed the following year, but in 2020, Anticor filed a civil case which usually triggers a probe by an investigating magistrate.

Kohler, whose office at the Elysee is located next to that of the president, is often described as Macron’s right-hand man.

His job involves handling emergencies, major economic and social issues as well as some political decisions.

His lawyer, Eric Dezeuze, said the discovery of evidence linked to the charging would allow Kohler “to prove his innocence”.

But Anticor lawyer Jean-Baptiste Soufron said “the question of his resignation is now on the table”.

Macron’s administration under pressure

Adding to pressure on Macron’s administration, Justice Minister Dupond-Moretti was ordered Monday to stand trial, charged with misusing his position to settle scores with opponents from his legal career.

The former star lawyer is the first sitting French justice minister to be charged in a legal probe.

The accusations relate to administrative inquiries ordered into three judges during Dupond-Moretti’s time as minister, which were denounced by critics as a witchhunt.

The three judges had ordered police in 2014 to pore through the phone records of dozens of lawyers and magistrates, including Dupond-Moretti, as part of an investigation into former president Nicolas Sarkozy.

The order to stand trial was issued by the investigation commission of the Law Court of the Republic in Paris, which hears cases of alleged wrongdoing by serving ministers.

‘Many irregularities’

But his lawyers, Christophe Ingrain and Remi Lorrain, said they had already appealed, sparking a temporary suspension of the move.

Lorrain said France’s highest appeals court would now pursue the matter.

A source close to the case said it was uncertain when the appeals court would rule on the matter.

Lorrain said there had been “many irregularities” in the case, and the chief prosecutor, Francois Molins, had been “unfair and biased”.

The case against Dupond-Moretti goes back to January 2021 when Anticor and a magistrates’ union filed a legal complaint, accusing him of using his ministerial powers to take revenge on his enemies in the judiciary.

He was charged the following July.

Despite opposition calls for him to be sacked, Macron re-appointed him as justice minister in a cabinet reshuffle earlier this year.

France’s two main magistrates’ unions said the accusations put Dupond-Moretti in an “unprecedented” position.

In a statement they said there could be “another conflict of interest” when Dupond-Moretti, as justice minister, picks a successor to prosecutor Molins who is to retire in June.

“He would get to appoint his own accuser,” the unions said.

Anti-corruption NGO Transparency International called for Dupond-Moretti’s resignation.

Contacted by AFP, Prime Minister Elisabeth Borne’s office declined to comment on whether Dupond-Moretti’s job was at risk.

A spokesperson for the prime minister noted simply that “the procedure is ongoing” and that it was organised so as not to affect Dupond-Moretti’s business as justice minister.

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