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PARIS, April 18 (Reuters) - France should gradually phase out regulated gas tariffs because they hinder competition and keep prices artificially high, the country's competition authority said on Thursday.
Regulated gas prices in France are based on a formula which includes the cost of procurement, transport, storage, distribution and commercialisation for market leader GDF Suez .
However, the system has failed to lower consumer prices, the antitrust body said, noting that French residential gas prices are well above the European average and above prices in Germany and Britain, where gas price regulation has been abolished.
"Regulated gas tariffs have a negative influence on competition, and do not benefit the competitiveness of French companies nor the purchasing power of French consumers," the Autorite de la Concurrence said in a recommendation to the government about the reform of the gas market.
Since 2007, gas companies are also able to sell gas at unregulated prices, but the regulated gas market makes it difficult for other firms to break the stronghold of GDF Suez, which controls 90 percent of the residential gas market.
Of the remaining 10 percent, 7 percent has been captured by state-owned EDF, which uses its dominant position in electricity distribution to also sell gas to its customers - at prices even higher than GDF Suez's, the antitrust body said.
France's Poweo Direct Energie and Italy's Eni each have about 1.5 percent of the market, but have been unable to gain a bigger share, despite selling gas up to 15 percent cheaper than GDF Suez.
Foreign players like Germany's E.ON and RWE and the Netherlands' Nuon avoid investing in the French retail market, despite their presence in several other European countries, as the regulated tariffs are too big a risk for them, the antitrust body said.
Unlike other countries, France does little to inform its citizens about the possibility of switching suppliers, and only 48 percent of the public knows this is possible, polls show.
The competition authority estimates the average residential customer with gas heating could save up to 450 euros per year, or 12 percent compared to regulated tariffs, by switching to alternative suppliers.
"The very presence of regulated tariffs is the principal reason for the dysfunction of the French gas market," the antitrust body said. (Reporting by Geert De Clercq; Editing by Mark Potter)