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Electricity Prices in France Under Investigation

Wednesday 01 April 2009

The European Commission has launched an investigation into electricity prices being charged by EDF, the French electricity provider.

The Commission is focussing its investigation on the wholesale prices being charged to competing electricity providers in France, which they consider may result in prices from these providers being higher than would ordinarily be the case.

Whilst the electricity market in France is in the process of deregulation, in line with EU directives, competitors to EDF are having a difficult time getting off the ground, with EDF still controlling 97% of the market.

The other providers include such names as Poweo, Direct Energie and GDF Suez, and their lack of progress in obtaining greater market share has lead the Commission to suspect that EDF may be abusing its dominant position in the market.

The Commission has stated that the investigation it has launched was not as a result of a complaint by one of these providers, but on its own initiative, after concerns about the lack of progress in introducing greater competition into the market for electricity in France.

As part of their investigations, earlier this month EU Commission officials raided the Paris offices of EDF.

Whilst EDF is ostensibly a private enterprise quoted on the French stock exchange, it is 85% owned by the French government.

Such is the size and power of the company that many French people call it ‘a state within a state’. Employees of EDF are some of the best paid workers in the country, with other terms and conditions that would also be the envy of most other workers around the world.

Electricity prices to business and individual consumers are regulated by the government, who decide each year by how much EDF can put up their prices.

These prices are generally lower than is being offered by their competitors, and it is likely the EU Commission considers that EDF may be keeping their prices artificially low in order to stall a liberalisation of the market.

The EU Commission is opposed to regulated prices, as they consider it a distortion of the market. They are placing huge pressure on France (and also Germany) to end its use in order to open up the market to other providers.

They also want to see a stronger legal and commercial separation of the production of electricity from the supply side.

At the moment, EDF effectively controls both the production and the distribution system, so closing the doors to potential competitors.

The EU Commission has already forced the German electricity monopoly ‘E.ON’ to sell off some of its own production capacity, on pain of a huge fine if it failed to do so.

This is the third enquiry in three years that the EU Commission has launched against EDF. There are other ongoing enquiries into the long term contracts that it had entered into with its major industrial customers, as well as an enquiry into tariffs it was imposing upon business customers who sought to return to EDF after having tried out another provider.

If EDF are found guilty of price fixing then they risk a penalty of up to 10% of their turnover.

Consumer groups in France are opposed to the ending of regulated prices, as electricity prices for consumers in France are one of the cheapest in Europe.

In large measure, this is because of the heavy public investment that has been made in the past in nuclear power generation.

There is also widespread criticism of the sales tactics of the new entrants in the market, with many complaints having been made to trading standards officials about aggressive selling, false promises having been made, and consumers being duped into signing contracts that they did not properly understand. EDF is not the only one in the firing line!

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You can read more in our guide to Electricity Services in France.

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