Bloomberg News

French Energy Regulator Says 2% Gas Price Increase Not Enough

July 19, 2012

France’s 2 percent increase in regulated natural-gas prices falls short of GDF Suez SA’s costs and could hinder competition in the domestic market, according to the energy regulator.

The Commission de Regulation de l’Energie said natural gas prices should be increased by 7.3 percent on Aug. 1, including a 4.1 percent rise for supply and 3.2 percent for other costs, based on a ruling published today in France’s Journal Officiel. The regulator’s opinion was pubished alongside the government’s decision on a 2 percent increase.

The regulator said the government’s decision goes against rules that say the former natural-gas monopoly must be allowed to cover its costs.

The disparity between GDF Suez’s cost of supplying the French market and the regulated rates it’s allowed to charge from Aug. 1 is the latest in a long-running battle between the utility and the government, which holds a 35 percent stake. GDF Suez (GSZ) last year took the previous government to court and won over a tariff freeze that was reversed.

New legal challenges to the 2 percent increase are “a risk that we are taking and we will assume because we want a fresh start,” French Environment and Energy Minister Delphine Batho said earlier this week in an interview.

Looking ahead, the regulator said GDF Suez’s natural-gas supply costs could drop Oct. 1, although this doesn’t justify raising regulated rates by 2 percent rate on Aug. 1, the regulator said today. GDF Suez’s cost of supply is calculated using a formula that takes into account oil and natural-gas prices and currency fluctuations

“Insufficient coverage of GDF Suez’s cost of supply by regulated rates could disrupt the natural gas market,” the regulator said today.

Regulated rates that are too low are an entry barrier to alternative suppliers to the market and a “lack of visibility” on rates won’t encourage new market participants, it said in the ruling.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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