Spain's Iberdrola terminating thousands of French retail power contracts as prices soar

The logo of Spanish utility company Iberdrola is seen outside its headquarters in Madrid
The logo of Spanish utility company Iberdrola is seen outside its headquarters in Madrid, Spain, May 23, 2018. REUTERS/Sergio Perez
  • Iberdrola says cannot provide competitive prices for now
  • Wholesale prices high while retail contract prices fixed
  • Tells clients to seek other supplier or risk losing power

PARIS, Aug 19 (Reuters) - Spanish utility Iberdrola is terminating power contracts with thousands of its French customers because of unprecedented power price rises, it said in a letter seen by Reuters.

Iberdrola, one of EDF's biggest competitors in France, said it recommended customers change to another supplier.

"We invite you to change supplier...If you do not, you risk an interruption to your power supply at the end of your contract with Iberdrola," the company wrote to customers.

An Iberdrola (IBE.MC) spokesman in Madrid confirmed the firm was terminating some contracts in France, but said on Friday the company was not pulling out of the French retail market.

He said only "a few thousands" of contracts had been affected by the move.

"We do not want to automatically renew contracts with existing customers because a lot of them would be badly affected. It is better for them to opt for the regulated tariff in France," he said.

He declined to specify how many French retail customers Iberdrola has, but industry estimates put the number at between 400,000 to 500,000.

The spokesman said that the majority of Iberdrola's French customers do not have to renew their contracts until 2023 or beyond.

Iberdrola said that at the end of 2021 its retail customer base in Portugal, France, Italy and Germany combined was 1.9 million contracts, an increase of 5% compared to end 2020.

In France, Iberdrola sold 1,313 GWh of power and 801 GWh of gas last year.

Following the opening of the French power market and the sharp drop in power prices a couple of years ago, several upstart companies, major non-power companies such as retailer Leclerc and foreign energy giants such as Iberdrola piled into the market, offering rates cheaper than EDF's.

Energy regulator CRE has estimated that in 2021 EDF (EDF.PA) was losing almost 100,000 customers per year. But a sharp rise in power prices since the start of the year has made the business model for alternative suppliers more difficult and the trend has reversed.

An EDF spokeswoman said the firm had won back some 300,000 clients since the start of the year.

"Some alternative suppliers are now struggling as they are forced to buy power at very high wholesale prices and must sell at a relatively low, contractually set, retail price," university Paris Dauphine-PSL economics professor Frederic Gonand said.

Iberdrola said it would continue to supply French consumers.

"The extremely high prices and extreme volatility in the current global energy context constrain us to transfer these costs to customers when establishing a new contract term," its spokesman said.

He added that Iberdrola needs to procure energy from the market and therefore will not be able to provide power at competitive prices. It said its prices would need to be way higher than EDF's regulated tariffs and did not want to force customers to pay price levels they have not explicitly chosen.

Reporting by Geert De Clercq, editing by Silvia Aloisi

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