GDF Suez Wins Court Case to Raise French Consumer Gas Rates

GDF Suez SA (GSZ), Europe’s biggest utility by market value, and competitors in France won permission to raise household gas bills in a ruling that may end a long-running dispute with the government over price caps.

State-mandated changes to prices in the past two years were based on a “legal error” and didn’t allow distributors to cover costs, the Conseil d’Etat, France’s highest court, said today in three separate rulings.

“We are turning the page, ending a period of conflict,” GDF Suez Chief Executive Officer Gerard Mestrallet said at a press conference. Today’s decisions will allow the former monopoly to collect 151 million euros ($205 million) from consumers over an 18-month period starting in July, he said.

French judges have ruled in favor of gas suppliers in several similar cases in recent months, allowing the energy companies bigger increases in regulated prices than the government previously decreed. Setting gas and power prices has proved politically difficult for successive governments under pressure from consumer groups to keep rates low.

The court today canceled three decisions on tariffs dating from June 2011, June 2012 and October 2012, and gave the government one month to set new rates. The fees were fixed before Energy Minister Delphine Batho unveiled a new system for calculating the rates in December.

Natural Gas

The rulings were “expected” and will cost French households heated with natural gas 23 euros and those using the energy for cooking 1.50 euros, Batho said in a statement today.

Court challenges are the only way for gas companies to obtain tariffs high enough to cover their costs of supply and allow competition on the French market, according to Fabien Chone, who heads an umbrella group of gas distributors called Anode, which competes with GDF Suez.

“Consumers are the real losers in all of this because rectifying their bills will be expensive,” he said by telephone.

Batho in December raised household gas prices by 2.4 percent from Jan. 1. That followed a court ruling in November that a 2 percent increase on Oct. 1 wasn’t enough.

The government also put in place a new system for calculating natural gas prices that the minister said would make changes “automatic” on a monthly basis. It will take into account new contract terms between GDF Suez and suppliers such as Norway and Russia and allow a greater dependence on supply linked to spot market prices.

GDF Suez said a previous court decision canceling a gas price freeze for the fourth quarter of 2011 will allow it to collect 214 million euros from consumers starting this month for 18 months.

France’s high court “is quite an alert guardian,” Mestrallet said today. Suspending the “automatic” nature of the new gas pricing system will be made more difficult through an expected government decree currently being written.

“Exceptional circumstances,” will have to be invoked and explained, Mestrallet said.

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

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