Suez Environnement ‘Social’ Water Rates May Widen Under Hollande

Suez Environnement introduced discounted tariffs in a town in southwestern France to help low- income families pay their water bills, in a program that could be extended across the country if Socialist presidential contender Francois Hollande is elected.

Suez Environnement is trialing the system in Libourne, near Bordeaux and has so far not lost any revenue, Chief Financial Officer Jean-Marc Boursier said today.

French water companies including Suez and bigger rival Veolia Environnement SA (VIE) held in 2010 about 65 percent of the French drinking-water market where volumes consumed have dropped since 2006, according to trade group Federation Professionelle des Entreprises de l’Eau, or FP2E.

Hollande, who is leading in polls to replace President Nicolas Sarkozy, has proposed rates for water, power and natural gas that would “guarantee access to all” and promote more efficient usage. Francois Brottes, his energy adviser, has said this would be based on consumers paying lower rates for minimum consumption and more if they use greater volumes.

The policy would change the way the majority of French consumers pay their water bills, which is generally based on a flat rate per cubic meter of water consumed, depending on where they live.

Suez Environnement charges different rates for water in Libourne, with the lowest for the first 15 cubic meters annually and the highest for volumes of more than five times that, Chief Financial Officer Jean-Marc Boursier said on a conference call.

Afford More

“We assume that if you have such high consumption you have a huge garden and maybe a swimming pool and you can afford it,” Boursier said. The rates are structured in such a way that “it doesn’t change too much” for overall revenues, he said.

“This is not negative if it’s done properly,” Verity Mitchell, an analyst at HCBC Holdings Plc, said by e-mail. “It can reduce bad debts as lower prices for poor people make bills affordable.”

About 2 million people pay more than 3 percent of their earnings on water, according to former Environment Minister Nathalie Kosciusko-Morizet. French lawmakers passed a law last year that would allow water companies to contribute to a fund to help low-income families pay their bills.

The law doesn’t stipulate the kind of rate structures being proposed by Hollande. Veolia has said it has put in place funds to help low-income families in towns around Paris.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net