French High Court Suspends Household Natural Gas Price Freeze

France’s highest court suspended a Sept. 29 government decision to freeze regulated natural gas prices for consumers today, ordering the energy ministry to establish new tariffs within a month.

Suppliers that compete with former natural gas monopoly GDF Suez SA (GSZ) including Direct Energie SA and Poweo (ALPWO) asked the court to block the decision while they appeal the government’s refusal to lift the freeze, which was scheduled to expire Oct. 1. GDF Suez filed a separate appeal.

“Serious doubts on the legality of the contested decision” exist, the Conseil d’Etat said in a statement. No clause “allows ministers to suspend the application of the tariff formula laid out in the decree” on regulating natural gas prices.

The government froze rates for a year in April, a decision the energy regulator ruled should have been reversed Oct. 1 to allow GDF Suez, which is 36 percent owned by the state, to cover the costs of buying natural gas for the French market. The freeze is “not compatible” with an open market, said the Commission de Regulation de l’Energie, which oversees the power sector.

A spokeswoman for French Industry Minister Eric Besson, who is also in charge of the energy ministry, declined to comment immediately. GDF Suez spokesman Antoine Lenoir did not immediately return a call for comment.

GDF Suez rose 7.3 percent as of 4:46 p.m. in Paris trading.

Natural gas supply costs rely both on short-term market prices as well as on long- and medium-term contracts reached by GDF Suez with countries like Russia, meaning that a freeze on the latter’s prices would trim the applicants’ margins, the court said.

The freeze would have the effect of “compromising their presence in the gas distribution market as well as the public goal to open this market to competition,” the court said in the statement.

To contact the reporters on this story: Heather Smith in Paris at hsmith26@bloomberg.net; Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

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