In a report dated November 7, 2024, the French Energy Regulation Agency recommended that the government maintain regulated tariffs for the sale of electricity. A few days later, it was the turn of the French Competition Authority to issue its report, recommending that preparations be made to abolish them. Why did these two independent administrative authorities come to such contradictory conclusions?
TRVE and its regulation
Regulated electricity sales tariffs (TRVE) are contracts for the supply of electricity, the price of which is set by the public authorities, on the recommendation of the Commission de Régulation de l'Energie (CRE). The CRE calculates tariffs by piling up costs (regulated access to historical nuclear electricity, cost of additional supply at market price, capacity guarantee, transmission costs, marketing costs). It proposes them to the Minister of the Economy (who will add taxes) and to the Minister of Energy. If this proposal does not meet with the government's approval, it can reject it and set the TRVE itself.
These TRVEs apply to households and small businesses. By June 30, 2024, more than half of the 40 million consumption sites (representing a quarter of the quantities consumed) had subscribed to a TRVE contract. As the electricity industry opens up to competition, TRVEs are a holdover from the era of the integrated monopoly under strict public control. Should they be retained, as recommended by the CRE, or abolished, as recommended by the Autorité de la Concurrence (AC)?
Causes of the difference of opinion
The arguments of the two independent administrative authorities revolve around the role entrusted to TRVEs, which must contribute to objectives of general economic interest, notably price stability, security of supply and social and territorial cohesion (article L337-9 of the Energy Code). In the AC's view, this is asking too much of a tariff, especially as its mere presence distorts the mechanisms of competition on the retail market, and only EDF and local distribution companies are authorized to offer it. The AC considers that electricity prices in a competitive environment should simply reflect production, transmission and marketing costs, to encourage consumers to avoid peak periods and acquire energy-saving equipment. As far as general economic interest objectives are concerned, the State has numerous financial and fiscal redistribution tools at its disposal, which are far more effective than a uniform tariff that disempowers consumers in their consumption and investment decisions. In its argument, the AC also invokes Directive 2019/944, article 5.6 of which stipulates that “Member States may apply public interventions in the price setting for the supply of electricity to household customers and to microenterprises”, but under certain conditions: “for the purpose of a transition period to establish effective competition for electricity supply contracts between suppliers, and to achieve fully effective market-based retail pricing of electricity”.
In defense of TRVEs, CRE adopts the view of consumer associations, which favor protection against market volatility and appreciate the fact that there is an "official" benchmark for assessing the relative attractiveness of commercial offers. It is also in line with the European authorities who, drawing lessons from the 2021-2022 energy crisis, are asking member states to enable consumers to make their energy bills affordable and less dependent on price fluctuations on the short-term electricity market (European regulation 2024/1747).
Areas of intervention
To understand the two authorities' differing points of view, it's also worth considering what each of them stands to gain or lose from a possible reform of retail electricity tariffs.
Abolishing the TRVEs, which are the responsibility of the CRE, means reducing its scope of intervention. And since all supply contracts with small consumers would become commercial contracts, the AC's scope of intervention would be enlarged. The positions taken by the two independent administrative authorities are therefore both well within their sphere of competence (defending competition for one, avoiding the upheavals of the retail market for the other) but also in their respective interests for the allocation of financial and human resources intended for their operation. Each is pleading its own cause.
Given the extension of electricity use to housing and transport, our lack of economic rationality in deciding on our electricity consumption in the face of ever-changing wholesale prices, and the French people's low appetite for competitive mechanisms, it is likely that the TRVE tariffs will continue to be approved by the government. They have the advantage of existing and are subscribed to by almost 60% of residential sites, i.e. too many voters for the government to consider abolishing these tariffs. But there is still one important step to be taken: obtaining the green light from Brussels for the next five years.
