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French Electricity Competition 'a Failure'

Tuesday 06 April 2021

A consumer group in France has demanded an end to the secondary electricity supply market, which they consider is putting up prices.

Since 2007, the electricity market in France has been open to competition, after decades of monopoly by EDF.

According to the the national energy regulator, the Commission de régulation de l’énergie (CRE), there are now 43 alternative electricity suppliers.

Although the French state-owned EDF group continues to the electricity supplier to around 80% of the population, it is losing about 100,000 customers every month, most of whom are signing up with retail suppliers Engie and Total Direct Energie.

Whilst the European Union wants EDF to be dismantled and nuclear power to be phased out, the consumer association CLCV has had enough.

"The opening of the electricity market is a failure that is proving harmful to the well-being of consumers," it said in a report published last month.

In its sights are rising bills and aggressive commercial techniques by the alternative suppliers.

"The regulated tariffs are increased to create a competitive market which does not exist", judges François Carlier, director general of CLCV.

That is a view that was also expressed in 2019, by the French competition authority, the Autorité de la concurrence who, in a highly unusual intervention, issued a statement condemning a 6% increase in the regulated tariff, 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"

The production arm of EDF produces almost 100% of the electricity thanks mainly to its nuclear reactors, which accounts for 80% of the electricity power in France. EDF is then obliged by law to sell at wholesale prices some of its production to its retail competitors.

However, unlike the supply of telephony or the airline market with low-cost airlines, there is no technological break with electricity says CCLV and the regulated EDF tariff set by the energy regulator leaves no room for manoeuvre by the alternative suppliers.

Last year the French Conseil d’Etat ruled that the regulated tariffs were contrary to European law, but the government has yet to act on that ruling.

If the CLCV recognizes that the suppliers' tariffs are lower on average by around 5% than those of EDF, it believes that this is done through aggressive and misleading selling techniques, "which turns into intimidation and lies".

The alternative operators are forced to resort to such tactics because they cannot materially differentiate themselves in terms of price or quality.

In 2018 the energy ombudsman, the Médiateur de l’énergie received 17,000 complaints about their practices, as a result of which a law was passed that banned energy cold-calling, although it still takes place.

The CLCV is in favour of an end to competition and a return to a regulated monopoly.

Other observers contend that price increases by EDF are not mainly to prop up the alternative suppliers, but are the result of taxes imposed on the supplier by the government to support green energy programmes, notably wind power. They also consider that the problem is not 'competition' per se, but the manner in which the European regulations have been interpreted by the State, to maintain the dominant position of EDF. 

In addition, although electricity prices have risen significantly in recent years, since 1996, at constant prices, the tariffs have actually fallen.

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