The French competition watchdog warns artificial pricing is unhelpful for consumers and stifles market rivalry. The energy regulator disagrees.
The French government should prepare to abolish regulated power tariffs (TRVs), the Autorité de la Concurrence, the nation’s competition watchdog has said.
In a statement published on Tuesday, the regulator said that the mechanisms “blur the price signals that should encourage consumers to reduce their energy consumption, and heavily affect competition”.
The TRVs are government-set electricity prices that are designed to ensure cost stability for customers, protecting them against wholesale price fluctuations.
These rates change twice a year, based on costs of electricity production.
For historical reasons, TRVs can only be offered by state-owned firm EDF and local distribution companies.
Watchdogs split on price regulation
France’s competition authority said on Tuesday that 59% of individual consumers use these fixed price mechanisms. That’s compared to 35% of small non-household consumers.
The TRV offers customers price predictability, and some experts suggest consumers also stick with the historical providers due to passivity.
“While their [TRV’s] ‘smoothing-out’ effect helps to keep prices stable, there is limited benefit to consumers, except in times of crisis,” argued the Autorité de la Concurrence.
“However, in times of crisis, TRVs alone are not enough to protect consumers, as the State can implement a number of additional measures,” it added.
While the competition regulator set out its stance on TRVs on Tuesday, so did France’s Commission de Régulation de l’Énergie, the nation’s energy watchdog.
Contrary to the view taken by the competition authority, it argued that the price mechanism is “compatible with the proper functioning of the market”.
The energy watchdog also noted that TRVs provide a benefit for consumers that “cannot be replaced in the short term”, and stated that rivals are able to replicate these measures if they wish.
Tariffs must be maintained for the next five years, it recommended.
Support for boosting competition
“Behind these positions lies a latent rivalry between the two authorities,” said Jacques Percebois, professor emeritus at the University of Montpellier.
“This shows that the authorities in charge of electricity are in a state of confusion,” he told Euronews, adding that the regulated tariff is widely supported by consumers.
David Cayla, professor of economics at Angers University, argued that France’s competition authority misses “major points” in its recommendation to scrap TRVs.
“The need for politically decided prices for electricity is a democratic matter more than an economic one,” he told Euronews.
He suggested that giving up political power over the market could boost populist support in France if the government is unable to contain costs.
Controlling electricity prices is also key to the green transition, Cayla added.
“This cannot be done without public control of electricity prices to guarantee French households that electricity prices will be kept low,” he said.
Anna Creti, professor at Université Paris Dauphine, nonetheless told Euronews that leaving TRVs in place is in conflict with European rules on fair competition.
EU legislation notes that tariffs should only be used as a temporary measure or to protect vulnerable or energy poor consumers.
Creti also explained that gas tariffs have not existed since July 2023. She therefore suggested that “leaving electricity tariffs in place for 5 more years” seems “very contradictory”.
