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are we heading towards the end of regulated electricity prices?

The file is opened by the Competition Authority which recommends to the government to abandon the system in the name of the principle of competition between the different suppliers. A very unpopular measure when certain measures of the 2025 budget are already controversial.

Published on 20/11/2024 09:18

Updated on 20/11/2024 09:30

Reading time: 3min

The price of electricity. GETTY IMAGES. (OSCAR MARTÍN / MOMENT RF)

Regulated energy prices are adopted today by a majority of French households – 59% exactly and 35% by businesses, mostly small businesses – to protect themselves from fluctuations in wholesale market prices. The objective being to avoid too large variations in the event of a crisis such as during the outbreak of war in Ukraine in February 2022.

A small political bomb for the government therefore finds itself faced with a small political bomb and will have to decide because the Energy Regulatory Commission recommends maintaining the system for five years. A battle between two policemen, that of Competition and that of energy, with the State in the middle.

The Competition Authority wants to put an end to this system, precisely in the name of respecting competition between energy operators, and in order to guarantee the readability of prices. This is what she recommends, Tuesday November 19. Households are today free to choose from a multitude of alternative suppliers such as Eni, Vatenfall, or TotalEnergies. However, these suppliers believe that the regulated price system leads to a form of immobility among customers while electricity prices have started to fall again on the wholesale market. Today, the way regulated prices are calculated, they appear higher than those of the free market. This is why the Competition Authority wants to put an end to it, in the name of fairness, for operators and customers.

But what would happen if there was a new energy crisis and prices started to soar again? The Competition Authority would have foreseen everything, since it recommends that the State prepare the abolition of regulated prices without renouncing the public policy objectives of ensuring security of supply, fair prices and transparency of information for the consumer. One or more suppliers of last resort could thus be designated and a reference index created to inform the consumer of price variations.

Based on these divergent recommendations from the Energy Regulatory Authority and the Competition Authority, Matignon will draft a report for the European Commission which is piloting the file remotely. But given the political risk that a removal of protective tariffs would entail, in the face of public opinion already heated on questions of purchasing power, it is a safe bet that Europe will opt for the status quo.


Belgium

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