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UPDATE 1-French top court to rule on EDF power tariff cap next week
September 3, 2014 / 4:31 PM / 3 years ago

UPDATE 1-French top court to rule on EDF power tariff cap next week

* EDF competitors say price caps distort the market

* Government to review tariffs in autumn (Adds alternative producer comment, data on market shares)

By Geert De Clercq

PARIS, Sept 3 (Reuters) - A top French court will rule next week on whether to overturn a government cap on EDF’s regulated electricity prices, which could have an impact on the utility’s earnings and stock price.

An official at the State Council, France’s highest administrative court, told Reuters on Wednesday a ruling is expected by the middle or end of next week.

The procedure follows a complaint by the Anode association of alternative power producers against Energy Minister Segolene Royal’s decision to scrap a 5 percent increase in power tariffs that had been scheduled for early August.

Royal’s announcement of the price cap on June 19 shaved $5 billion of market value off France’s dominant power supplier EDF and an annulment of the cap could give the shares a boost.

Days later, Prime Minister Manuel Valls said there would be a tariff increase after all in the autumn, but of less than 5 percent. He has not talked about the issue since a cabinet shake-up late last month in which several leftist ministers left his government.

Anode president Fabien Chone told a public hearing at the court on Wednesday that artificially low power tariffs make it difficult for alternative power vendors to compete with EDF.

“The price caps are blocking the development of competition in the market,” he said.

He said that the law specifies that EDF’s regulated power tariffs must cover its cost of power generation, and that even if the government announces its intention to change the law, it must comply with current legislation.

Anode had asked for an expedited summary procedure because of the importance of the case. A summary procedure allows the court to suspend the execution of a disputed administrative decision pending an investigation of the complaint and court ruling on it.

The State Council (Conseil d‘Etat) has in the past overruled government caps on power prices. In April, it ruled that a July 2012 cap on power tariff increases decided by the previous government was illegal and ordered the government to implement a backdated tariff increase.

In January 2013, the court also annulled government-imposed limits on 2011 and 2012 gas price increases for consumers.

EUROPE TREND

Royal’s cap on tariffs is part of a Europe-wide trend to limit energy price rises as governments try to bolster consumer spending in the face of stubbornly high unemployment.

In the past decade, successive French governments from the left and the right have limited increases in regulated power tariffs, which has made it difficult for new entrants to win market share from former monopoly provider EDF.

Since France’s residential power market was opened to competition in 2007, alternative suppliers had won a market share of just 8.3 percent, or 2.6 million of 31.3 million household sites at the end of March, according to energy market regulator CRE.

In terms of volume of power sold, alternative suppliers - which include Direct Energy and Belgium’s Lampiris - had a market share of 6.1 percent of the residential market.

The industrial market is more open and top European utilities such as Iberdrola, Vattenfall, E.ON , Enel, Alpiq and Axpo sell power to big French clients, giving alternative suppliers 24.2 percent of the volume sold to non-residential sites. (Keiron Henderson)

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