We look at the government’s price guard and the next step in getting rid of it.
The regulated power rate will go up by 10% on August 1 because France will no longer protect prices as much.
The government says that the average electric-heated home will see its bills go up by about €160 per year, bringing the total cost to €1,800 per year.
More than 20 million homes and 1.5 million small companies will be affected by the changes. Most of the people affected are on EDF’s regulated Tarif Bleu deal, but people with market-rate contracts that are based on the regulated tariff will also be affected.
Prices Would Have Increased 100% This Year
As part of the government’s “price shield” plan to deal with the global energy problem, prices could only go up by 4% in the fall of 2021.
Then, prices went up by 15% at the beginning of this year, before this second increase in August.
Prices are usually changed twice a year based on what France’s independent energy body, CRE, says should happen.
The CRE says that if the government hadn’t stepped in, energy prices would have gone up by 35% in 2022 and 100% this year.
The government says this means that in the second half of the year, the state will pay for an average of 37% of the cost of energy, down from 43% now.
Government Tries to Balance the Books
Gabriel Attal, who is in charge of public finances, has said that the price shield will be slowly taken away by the end of 2024.
Finance Minister Bruno Le Maire had said before that it would go on until the beginning of 2025.
This is part of the government’s larger plan to cut spending and debt.
Mr. Le Maire said in April that getting rid of the price guards for both gas and electricity will save about €14 billion by the end of 2027.
The freeze on gas price increases ended in July, but it didn’t have much of an effect on buyers since gas prices have dropped below the levels set by the government.
Lower Bills Than Most European Neighbours
At the end of last year, the government estimated that the price shield would cost families, businesses, and local governments €110 billion over three years, from 2021 to 2023.
Because of this move, France has been able to keep its energy prices lower than most of its neighbors.
At the beginning of the year, electricity bills for homes were half as much as they were in the UK and other big European countries, with the exception of Spain and Portugal.