2023-07-01 14:00:08
The French gas supply market was opened to competition on July 1, 2007, at the same time as the electricity market. EDF-GDF (which became GDF, GDF Suez then Engie) and the twenty or so local distribution companies (ELD) holding a market monopoly saw the emergence of a multitude of new suppliers.
The abolition of regulated gas sales tariffs (TRV) follows the compliance of French law with European law. There decision of the Council of Statelisted in the energy and climate law of 8 November 2019 (art. 63), justifies the end of the TRV system, “on the grounds that it required certain suppliers to offer the end consumer the supply of natural gas at regulated tariffs, which constitutes an obstacle to the creation of a competitive gas market”.
The abolition of regulated sales tariffs has been scheduled in two stages:
on December 1, 2020 for all professionals; on July 1, 2023 for individuals, condominiums and apartment buildings.
How is the price of gas calculated?
For consumers, the bill consists of a fixed amount (in euros per year), the subscription, which depends on the power subscribed, and a variable part, which is based on the quantity of gas actually consumed (in euros per kilowatt-hour, kWh). This cost is divided into three main items:
the cost of the gas marketed by the supplier who obtains its supplies on the markets; the cost of gas distribution, transport and storage; taxes: domestic tax on natural gas consumption (TICGN), transmission tariff contribution (CTA) and Value Added Tax (VAT).
Regulated gas sales tariffs have until now been set monthly by the Energy Regulatory Commission (CRE), taking into account suppliers’ supply, transport and storage costs. These tariffs were subject to the approval of the ministers responsible for energy and the economy.
According the CRE observatorynearly a quarter of the 10.6 million residential sites connected to gas (2.55 million, i.e. 24%) benefited from an offer at regulated prices as of December 31, 2022. Among the 8.1 million residential sites in market offer, 45.3% are customers of an incumbent supplier (Engie or ELD) and 54.7% are with an alternative supplier.
Why did the price of gas soar?
The explosion in gas prices is above all linked to the situation of France, a non-gas producer, which is dependent on the European wholesale markets for its supply. In France, gas purchases and sales are made on a single market, the gas exchange point (PEG). The price on the wholesale markets is therefore linked to several factors: supply and demand, the price of oil, weather conditions (a cold spell leads to an increase in demand) and the geopolitical situation.
The surge in gas prices since mid-2021 was first due to the economic and industrial recovery as soon as the economic crisis produced by the Covid-19 pandemic emerged, causing strong demand. Between August 2020 and August 2021, the monthly wholesale price on the French market (PEG) increased more than five times, from 7.80 euros to 44.10 euros per MWh. The war in Ukraine has caused strong tensions on supply, in particular with the drying up of Russian gas imports during 2022. The monthly price on the French market was thus 3.8 times higher in August 2022 than a year earlier, reaching a maximum of 170.40 euros per MWh.
How did the State limit the rise in tariffs?
Faced with this surge in energy prices, Jean Castex, then Prime Minister, announced a “tariff shield” from November 2021, for « to protect [les Français] against [les] price hikes » gas and electricity. For gas, the last revision of +12.6% of the TRV in November 2021 was blocked until the end of 2022. The tariff shield was then renewed with a 15% increase in the TRV. The net cost of tariff shields (gas and electricity) is estimated at 21 billion euros for the year 2023.
The tariff shield extension, for both gas and electricity, is included in the finance law until June 30, and therefore ends at the same time as the regulated tariffs. In fact, with the fall in the price of gas on the wholesale markets, this regulated tariff has become significantly higher than it would have been without a tariff shield: the device has in fact no longer been necessary for two months.
Should we fear a rise in gas prices?
To attract more than two million new subscribers to gas market offers, one can imagine that the operators, at least initially, will offer attractive offers. The Energy Regulation Commission publishes a “benchmark selling price” for gas each month, detailing the cost of the fixed part (subscription) and a range (minimum, average and maximum values) of the variable cost, in euros per MWh consumes.
An Engie expert explains the sharp drop in the price of gas on the markets – they have almost been divided by ten since the peak in August 2022 – by three elements: efforts at sobriety (demand is between 10% and 15% lower than before the start of the energy price crisis), the high level of stocks throughout Europe and the supply of liquefied natural gas, which has been very dynamic since the beginning of the year. Markets are almost back to pre-crisis levels, and despite significant daily volatility, the specialist “Is confident that this price level will continue in the summer and fall, barring any major events”.
For winter, two potential shadows in the picture could push prices up again: demand from China and the Atlantic basin could recreate tensions on the European market if it picks up strongly, and the European electricity system could be a very strong demand of gas in the event of harsh winters.
Read also: Where are the gas stocks of European countries? The list in our dashboard
Do I have to take out a new contract if I was benefiting from regulated tariffs?
If until now you had a gas supply at regulated prices, you will have to subscribe to a market supply. Don’t worry if you haven’t done so yet, your gas supply will not be cut off: you will automatically switch to a generic offer from your supplier. Engie has indexed its gateway offer to CRE’s “mark sale price”, specifying that this offer is very close to the regulated tariff, and even slightly below due to prices which are trending downwards.
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