October 2, 2013 / 3:58 PM / 6 years ago

EDF tariff hike kick-starts France's retail power market

* French govt lifted EDF’s regulated tariffs by 5 pct effective from Aug

* Households now looking at cheaper retail contracts

* GDF SUEZ hopes to reach 5 mln clients in next five years

* EDF says market share unchanged at 92 pct

By Muriel Boselli

PARIS, Oct 2 (Reuters) - After six years of inertia, France’s electricity retail market is timidly starting to open up to competition after the government announced in July the most significant regulated tariff hikes in over a decade, sector players said on Wednesday.

A growing number of French households, which still benefit from regulated electricity tariffs through former power monopoly EDF, are now subscribing to cheaper free-market offers by rivals.

France, which has one of Europe’s most closed electricity markets, set a 5 percent tariff rise in August, finally giving retail power suppliers the possibility to grab some of EDF’s 92 percent market share.

The government will repeat the hike in 2014 and 2015 mainly to cover EDF’s rising costs and to stave off lawsuits by EDF’s competitors, which argue that artificially low tariffs distort competition.

“New publicity campaigns and the increasing number of offers are signs that make us think that the sector is reviving somewhat,” an official at France’s energy regulator CRE, who declined to be named, said. The regulator will release official data reflecting post-hike changes at the start of December.

“We used to have 3,500 new clients per week but since September this number has increased to 6,500,” Fabien Chone, deputy head of Direct Energie, an energy supplier told Reuters.

Since markets fully opened up to competition in 2007, only 2.2 million homes out of 30.9 million opted for free-market offers, the CRE said in its quarterly report in September.

GDF Suez, France’s former gas monopoly, now expects to reach 5 million clients in the next five years instead of 2 million previously, a company spokesman said, adding the group had reached 1.6 million clients by the end of August.

French homes have snubbed the opening of the retail electricity market for years due to stubbornly low regulated tariffs made possible by EDF’s fleet of nuclear reactors and a lack of information from the authorities, industry players say.

“One client out of two still doesn’t know markets are open, two out of three think GDF (GDF Suez) and EDF are the same (state company) and 80 percent think regulated tariffs are the cheapest,” Chone said, citing poll results done by his firm.

EDF says its market share has not changed.

“We have not noticed a massive wave of departures since the government announced a five percent tariff hike,” an EDF spokeswoman said. “Each month, we see a few thousand clients leave but we also see a similar number come back,” she added.

The European Commission says the French electricity market remains one of the most closed in the EU both in the wholesale and retail segments.

“At retail level, regulated prices continue to act as a barrier for new entrants,” the commission says on its website.

“While taking into account universal service obligations and effective protection of vulnerable customers, blanket price regulation for households should be phased out and energy efficiency measures should be promoted as a means to keep energy bills down,” the Commission added. (Additional reporting by Barbara Lewis in Brussels; editing by James Jukwey)

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