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EDF Electricity Price Increase 2019

Tuesday 08 October 2019

Electricity prices from EDF have increased substantially this year, but not because of an increase in their costs.

In June, the regulated electricity prices in France increased on average by 5.9%, and by a further 1.2% in August.

That is the largest increase in prices in a single year for over 20 years.

The regulated prices charged by the State electricity giant are determined by the notionally independant Commission de régulation de l’énergie (CRE).

As a general rule they occur annually in August, with the rise based on the historic cost of the provision of nuclear power and those necessary to meet the additional costs of supply.

However, this year, the 6% increase in June was on a rather different basis.

Since 2018 the private electricity suppliers in France have been suffering from an increase in wholesale electricity prices. These prices had become higher than the wholesale tariff they obtained from EDF, which was fixed by regulation.

Previously, cheaper wholesale tariffs had made it possible for them to offer better rates to their customers than EDF.

With the increase in wholesale tariffs, and their ability to buy more cheaply from EDF constrained by quota limits, unless they could put up their prices they risked going out of business.

So the only way to square the circle was to impose a substantial increase in the regulated consumer EDF tariff in order that private suppliers* could also increase their prices without losing a competitive advantage.

The result has been not only to offer protection to private suppliers, but to provide EDF with an huge injection of additional income.

In a highly unusual intervention, the competition authority in France, the Autorité de la concurrence, issued a statement condemning the increase, stating “40% of the proposed increase does not correspond to an increase in EDF's supply costs but is intended to enable EDF's competitors to offer prices equal to or lower than the regulated tariff.”

They considered that it was "contrary to Parliament's desire to offer consumers regulated tariffs that would restore the benefits of the competitiveness of the historic nuclear fleet" and that the current regulatory structure needed to be changed as it has resulted in a pricing system that subsidises the least efficient suppliers.

They added that the change in the price structure to private suppliers "has not yet been the subject of a transparent and informed public debate"

Last year the highest administrative court in France, the Conseil d’Etat ruled that the regulated EDF tariffs were contrary to European law, but the government has yet to act on that ruling.

EDF do also have market led tariffs for consumers, but over 80% of the population continue to prefer the guarantee of the regulated tariff. Whether they will continue to do so after these latest increases remains to be seen.

Over the past 20 years electricity prices in France have risen substantially, in part due to the taxes that have been added to the basic tariff, and which now account for around one-third of your electricity bill.

However, prices still remain lower than most European countries, due to nuclear power, which accounts for 80% of power generation.

*Not all private suppliers have been wholly affected as they are alternative, green energy suppliers. They are Total Direct Engie, Eni, and Enercoop

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