GDF Suez Gas Tariff Should Change to Reflect New Costs, CRE Says

Tariffs charged by GDF Suez SA (GSZ), France’s biggest natural gas utility, should be modified starting next month to take into account changes in the European market for the fuel, the industry regulator said.

A new formula should reflect a greater reliance on supplies linked to regional spot-market prices, the Commission de Regulation de l’Energie said in a statement. Almost 60 percent of supplies are now indexed to the spot market, whereas the current formula assumes a share of just 45.8 percent, it said.

GDF Suez traditionally bought gas through long-term contracts linked to crude prices from companies such as Russia’s OAO Gazprom. As spot prices dropped starting in 2008, utilities increasingly sought to renegotiate these deals. The French government, which sets tariffs for the former monopoly, has encouraged these talks as a way to cut consumers’ bills.

Lower supply costs would push down regulated rates by an estimated 2 percent to 3 percent, according to the statement, which was released with an audit of the utilty’s costs. This would be offset by transport, distribution, marketing and storage expenses that would add 4 percent to the tariff.

The audit showed increases of 3 percent in costs for distribution in 2014 and next year, 11 percent for transport, 21 percent for storage and 10 percent for commercial expenses.

Regulated prices have caused friction between GDF Suez, the government and smaller suppliers seeking to compete. The past failure of successive administrations to allow prices to reflect costs led to losses for GDF Suez and difficulties for new entrants.

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

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Ana Monteiro, Alex Devine

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