* Top court annuls government gas price caps
* Says government must obey own rules, set new tariffs
* Ruling is step towards ending French gas price distortion
* Government says price catch-up to be smoothed out over 18
(Adds government comment, other gas vendors, background)
PARIS, Jan 30 France's highest administrative
court annulled government-imposed limits on 2011 and 2012 gas
price increases for consumers, paving the way for normalisation
of a market distorted by years of state curbs.
French gas utility GDF Suez and its sector peers
had challenged the caps in court, arguing that the rises did not
cover their gas supply costs.
The ruling on Wednesday by the state council, along with a
new gas pricing system, could restore market principles to the
French consumer gas sector.
The council also ordered the government to come up with new
tariffs within a month.
The government late last year announced a new gas pricing
system that will come into force this year and will more closely
reflect market prices, adjusting gas prices on a monthly basis
and relying less on the price of oil.
The state council ruled that a June 27, 2011 decree had
fixed gas price increases at 3.2 percent while they should have
risen 7.1 percent for the third quarter of 2011, based on the
government's own method of calculation.
A second decree, on July 18, 2012, capped the Aug. 1, 2012
gas price increase at 2 percent, while prices should have risen
4.1 percent. A third decree dated Sept. 26, 2012 capped the Oct.
1, 2012 price rise at 2 percent when it should have been 6.1
The ruling had been widely expected and follows a similar
decision in July 2012.
"The ministers concerned should make sure that gas prices
are set so that they cover the average cost of gas supply, as
determined by law," the council said.
A spokesman for Environment and Energy Minister Delphine
Batho said the under-charging would be balanced by a catch-up
payment of 23 euros from families heating with gas, spread out
over 18 months, or 1.3 euros per month.
"The government will make sure that the gas companies limit
the impact of this catch-up by smoothing it out as much as
possible over time," Batho said in a statement.
GDF Suez CEO Gerard Mestrallet told reporters his firm would
recoup 151 million euros ($205 million) from the price catch-up.
In December, he said the gas price caps over 2012 had had a
185 million euro negative impact on the firm's gross profit
(EBITDA), with a 165 million euro impact on the fourth quarter
alone, due to the cold weather.
GDF Suez shares rose as much as 0.75 percent after
the state council announcement but lost those gains quickly and
closed 1.1 percent lower, underperforming the CAC 40 index which
lost 0.5 percent.
Since Jan. 1, France has put in place a system that fixes
gas tariffs on a monthly basis, replacing quarterly adjustments
and reducing the impact of oil price changes on the gas price.
Under the new price calculation formula, spot gas prices
will determine 36 percent of the consumer gas price, from 26
GDF Suez, 36 percent government owned, now every month
proposes a price change based on its supply costs to the
country's energy regulator (CRE).
Although France fully opened up its energy market to
competition in 2007, in line with EU directives, most consumers
still subscribe to France's state tariffs, delivered by former
gas monopoly GDF Suez.
GDF Suez competitors such as Poweo Direct Energie
and Italy's Eni, say the government's efforts to limit
gas price increases in France distort competition, preventing
consumers from switching to their cheaper offers.
Late last year Anode, the French gas marketing association
that groups alternative gas suppliers, threatened to take its
complaints about the pricing system to the European Commission.
(Reporting by Geert De Clercq, Michel Rose and Benjamin Mallet;
Writing by Geert De Clercq; Editing by Anthony Barker)