Bloomberg News

France to Raise Consumer Gas Prices by 2.4%, Batho Says

December 10, 2012

GDF Suez SA (GSZ), which has sued the French government for higher regulated gas prices, will be able to raise consumer tariffs by 2.4 percent at the start of next year, according to Energy Minister Delphine Batho.

The increase will take into account new contract terms between the utility and long-term suppliers, she said today in Paris. So-called social rates will be extended to 830,000 more low earners and the system for calculating rates has been revised.

Today’s decision on tariffs follows a ruling by the country’s highest court last month that a 2 percent increase in consumer gas rates on Oct. 1 wasn’t enough to allow French natural-gas distributors to cover costs.

The legal challenge was the latest by an organization called Anode, which represents gas distributors and is seeking to compete with former monopoly supplier GDF Suez. GDF Suez has mounted separate court cases against the government over tariffs.

“We have asked GDF Suez to renegotiate its long-term supply contracts and this has helped us limit the increase,” Batho said today.

The proportion of supply indexed to spot market prices for natural gas will be increased to 36 percent in January from 26 percent, she told a press conference.

Annual Framework

A new system for calculating regulated rates will also be put in place under which the government will determine an “annual framework” for rates, which will be reviewed monthly, rather than the current quarterly revisions, she said.

“The idea is that this will be automatic,” Batho said at the press conference.

Even then, there will be a safeguard in that the government can “take things back in hand” in the event of exceptional circumstances, she said.

France’s highest court, the Conseil d’Etat, ruled last month there is “serious doubt” about the legality of a 2 percent increase in gas prices allowed by the government from Oct. 1. It gave the state one month to announce new rates. Like previous rulings, the court referred in its decision to France’s energy regulator, which for the period in question had ruled prices should have increased 6.1 percent to allow utilities to cover their costs of supply.

Legal Challenges

GDF Suez, 35 percent owned by the government, and Anode, which represents companies including Direct Energie, mounted six legal challenges to state-set gas prices in the past year. The Conseil d’Etat has ruled on four cases so far, each time in favor of the gas companies. It has cited findings by the energy regulator known as the Commission de Regulation de l’Energie that state-set rates should have been higher to allow companies to cover their costs and compete in the market.

GDF Suez said last week the failure by the government to raise rates enough to cover costs of supply in the second half of the year had cost the utility 185 million euros ($239 million). Its biggest suppliers are Norway, Russia, Algeria and the Netherlands.

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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