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France caps power prices increase at 15% next year to shield consumers

France to set new energy price cap to shield consumers
France to set new energy price cap to shield consumers Copyright Thomson Reuters 2022
Copyright Thomson Reuters 2022
By Reuters
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By Tassilo Hummel and Leigh Thomas

PARIS -Power and gas price increases for French households will be capped at 15% next year, Prime Minister Elisabeth Borne said on Wednesday, as governments across Europe look to tackle prices that have soared after Russia's invasion of Ukraine.

Borne said the new price cap increase for gas would take effect from January, while the cap increase on electricity would follow a month later.

"We are determined, just like at the beginning of the crises that we face, to act, adapt and protect the French people and our economy", Borne told a press conference.

President Emmanuel Macron's government has spent billions of euros on measures to dampen the inflationary impact of surging energy prices in the market, including a rebate on fuel pump tariffs.

France, home to the world's biggest fleet of nuclear reactors after the United States, is less exposed than its European neighbours to a cut in Russian gas supplies in retaliation for Western sanctions.

But an unprecedented number of reactor outages have driven French nuclear power output to a 30-year low just as Europe scrambles to find an alternative to Russian supplies, adding to the continent-wide energy crunch.

The 2023 caps mean that households with gas heating will on average pay 25 euros more every month instead of an extra 200 euros were there no cap. The average household with electricity heating will see power bills increase by 20 euros a month, the prime minister added.

France recorded the lowest inflation rate in the European Union in August, at 6.5% in EU-harmonised terms.

Finance Minister Bruno Le Maire said the new measures would cost the state an additional 16 billion euros, with 11 billion needed for the gas cap and 5 billion for electricity.

There was no risk of a total blackout in France this winter due to the energy crisis, but some power cuts could not be ruled out during peaks of demand, the grid operator RTE said earlier.

RTE said lowering national electricity consumption by 1% to 5% in most scenarios and up to 15% in an extreme scenario of gas shortage and very cold weather could help avert a power crunch. It added it would be on alert to monitor market developments from November, or sooner if needed. RTE usually starts its winter monitoring in January.

"Compared to other European countries, France should be structurally in a less difficult position," RTE said.

Nuclear power group EDF chief Jean-Bernard Levy told a parliamentary hearing that repair works on reactors affected by corrosion issues were "well on track" and that the utility hoped to reach around the same nuclear output levels as last winter.

Governments across Europe have already ploughed hundreds of billions of euros into tax cuts, handouts and subsidies to tackle a crisis that is driving up inflation, forcing industries to shut production and hiking bills ahead of winter.

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