A 14% reduction in regulated electricity prices is planned for February 1. This measure will relieve the budget of millions of French households in a context of energy crisis. But what will be the consequences in the long term?
In a context of soaring energy prices, a glimmer of hope is lighting up the horizons of French consumers. Indeed, the government announced a significant drop of 14% in regulated electricity prices from February 1. This measure, which follows the end of the price shield put in place during the energy crisis, will allow millions of households to take some time off their bills.
The End of the Tariff Shield Without Tax Increase
The electricity price shield, introduced by the government to protect consumers in the face of soaring market prices, will end as planned on February 1. But contrary to what was initially envisaged, this deadline will not be accompanied by an increase in the domestic tax on final electricity consumption (TICFE). The draft budget presented last October in fact planned to increase this tax in order to generate 3.4 billion euros in additional revenue for the State. A proposal which sparked an outcry in Parliament.
Ultimately, the government decided to forego this increase, allowing regulated electricity prices to fully reflect the drop in prices in wholesale markets. Concretely, the TICFE will return to its pre-crisis level, but without going beyond. A decision welcomed by consumer associations.
Relief for the Purchasing Power of the French
In a context of persistent inflation, where many households are struggling to make ends meet, this 14% reduction in regulated electricity prices is a real breath of fresh air. According to an estimate from the national energy mediator, it should allow an average saving of 160 euros per year per household.
This price reduction is excellent news for the French. In the current context, any reduction in charges is a good idea to support purchasing power.
François Carlier, general delegate of the CLCV consumer association
While the energy crisis has highlighted the energy insecurity of many households, forced to restrict their consumption because they cannot pay their bills, this price reduction will give some breathing space to even the tightest budgets. A relief that is all the more appreciable since electricity is a basic necessity, essential to everyone's daily life.
Alternative Suppliers Forced to Align
If this 14% reduction concerns the regulated prices applied by EDF, the main electricity supplier in France, it should nevertheless benefit all consumers. Indeed, alternative suppliers, who have gained significant market share in recent years, should be forced to align to remain competitive.
Since the opening of the electricity market to competition in 2007, many players have come to challenge the historic operator by offering offers at reduced prices. But with this reduction in regulated prices, the price gap between EDF and its competitors will narrow, pushing the latter to adjust their price scales so as not to lose attractiveness.
Alternative suppliers will have no choice but to lower their prices if they want to keep their customers. This is good news for competition and for purchasing power.
– A source close to the sector
Thus, even consumers who have opted for an alternative supplier should benefit, indirectly, from this measure in favor of purchasing power. A virtuous dynamic that should benefit as many people as possible.
A Decline Made Possible by the Decline in Market Prices
If the government can afford to lower regulated electricity prices without increasing taxes, it is above all thanks to the lull on the wholesale markets. After reaching peaks in 2022 in the wake of the war in Ukraine and tensions over supplies, electricity prices have fallen sharply in recent months.
This relaxation can be explained in particular by the gradual return to service of the French nuclear fleet, which had experienced significant maintenance problems, as well as by the reduction in demand linked to energy conservation efforts made by households and businesses. Factors which made it possible to rebuild stocks and reassure the markets.
The drop in wholesale prices makes the measure sustainable for public finances. This is a window of opportunity that the government has been able to seize.
– An energy sector analyst
Thus, without this lull in the markets, it would have been difficult for the State to renounce an increase in taxation on electricity, although it was politically explosive. A favorable situation which makes it possible to reconcile support for purchasing power and control of deficits.
The Challenges of the Energy Transition
But beyond the immediate effect on household bills, this price reduction also raises questions about financing the energy transition. Because if it relieves consumers in the short term, it also deprives the State of tax revenue which could have been invested in the development of renewable energies.
In a context of climate emergency, where France has set ambitious targets for reducing its greenhouse gas emissions, the challenge is significant. It is about reconciling purchasing power et green investmentstwo imperatives which can sometimes come into tension.
The energy transition has a cost, someone has to pay. The question is how to distribute this effort without weakening the most precarious.
– An expert in energy issues
A complex equation that calls for political responses that meet the challenges. Because if it is essential to protect the purchasing power of households, it is just as crucial to prepare for the future by investing massively in the decarbonization of our energy mix. A challenge that cannot be met without a long-term vision and strong political support.
