The French government will block rises to gas and electricity prices, as it seeks to relieve the pressure of a global gas crunch and soaring energy costs across Europe.
In a televised address on Thursday evening, Jean Castex, prime minister, announced that, after an already scheduled 12.6 per cent rise in gas prices on Friday, the government would block any further price increases until April.
Castex also announced that the government would limit electricity price rises due to take place in February to 4 per cent, by lowering taxes paid on power.
“We are going to put in place what I would call a ‘price shield’ for gas and electricity,” Castex said on the TF1 television channel. “We are going to protect ourselves from these price increases.”
With presidential elections set for April, the government is acutely aware of the risks of consumers facing higher prices. It is eager to avoid a repeat of 2018 when the gilets jaunes protest movement was catalysed by a spike in energy prices and a government proposal to boost fuel taxes to fight climate change.
With electricity prices poised to keep climbing into the spring of 2022, France’s energy policy was becoming a key area of policy debate among candidates in the presidential election.
The French government had already announced an exceptional energy subsidy of €100 for the 5.8m poorest households in the country, which accounted for €580m in government spending. Castex said that if the measures to freeze energy prices did not do enough to alleviate pressure on households, the government would consider increasing this payment.
Barbara Pompili, France’s environment minister, announced on Thursday that the price of electricity was set to rise by 12 per cent early next year for 70 per cent of households. This will now be limited to 4 per cent, with the higher cost offset by lower taxes paid on electricity.
Meanwhile, the 3m households that use gas and do not pay a fixed price would have been subject to a 15 per cent increase in their bill from November 1, on top of a 12.6 per cent rise on Friday of this week, Pompili said.
This is now frozen, with no further price rises to take place after October 1 until a drop in global prices, expected in March or April, Castex said.
French consumers have been partially insulated from the soaring price of electricity elsewhere in Europe and Asia because more than 70 per cent of the nation’s power comes from nuclear plants. Nonetheless there has been frustration among the public and businesses that the country’s nuclear-rich energy mix has not shielded them more thoroughly from global price hikes.
This is in part because a portion of France’s electricity is indexed to the wider European market, with the price set by the marginal cost of the last unit of energy required, which is usually gas.
“The man on the street says: ‘you’ve told us all about this wonderful, cheaper nuclear energy we have in France, so why is my energy bill going up?’,” said Denis Florin, partner at Lavoisier Conseil, an energy-focused management consultancy. “He’s saying ‘show me the money’.”
This frustration has led more broadly to calls for France to be granted greater energy “sovereignty”.
Last week, Bruno Le Maire, minister of the economy and finance, described the European energy pricing system as “ludicrous” and “obsolete”.
Speaking on parliamentary TV, he said: “In France, we get our electricity from nuclear power plants and hydroelectric plants . . . We therefore have carbon-free energy at a very low cost, but the market . . . means that electricity prices are aligned with gas prices.”
“The French are paying the bill in a way that they cannot understand — and that is totally inefficient from an economic point of view,” he added.