EDF Rivals to Seek Higher Power Rates Through Court Challenge

Electricite de France SA’s competitors asked France’s highest administrative court to raise regulated power rates after Energy Minister Segolene Royal canceled a planned increase.

The case was brought to the Conseil d’Etat by Anode, an organization representing alternative power and gas suppliers on the French market, according to its president, Fabien Chone.

“We are simply asking that EDF’s costs be covered,” Chone said in a telephone interview today. A court decision could take as long as 18 months.

In a surprise move on June 19, Royal announced on a morning talk show that a planned 5 percent increase in state-set electricity prices would be canceled and replaced by a new calculation method. The news rattled investors in the utility, wiping as much as 6 billion euros ($8.2 billion) off EDF’s market value during trading that day because of the uncertainty created about future earnings.

“There was a consensus in place for a moderate rise in electricity rates over a number of years and this has been torpedoed,” Chone said. “It’s regrettable.”

The organization’s decision to turn to the court to get consumers to pay higher energy rates is just the latest in a long series of legal battles over regulated power and natural gas prices in France. The court ruled in April that a 2 percent rise in power rates decided by the government in July 2012 was too low. It also made a series of decisions in the past that led to higher gas rates.

Cover Costs

By law, rates are supposed to cover costs for utilities EDF and GDF Suez SA (GSZ), the former power and gas monopolies, and the country’s regulator makes recommendations about how tariffs should be modified to fulfill this requirement. The advice isn’t always heeded by energy ministers.

Anode, which represents competitors like Direct Energie, has pushed for higher regulated rates because it says it can’t compete on the French market when they are too low. A study published today by the energy regulator concluded that more needs to be done to make the market more competitive.

Writing in an opinion piece in Les Echos newspaper today, Chone said the canceling of the planned power-rate increase makes no sense “economically and environmentally.” The state, EDF and Anode had agreed that the 5 percentage point increases were needed, he said.

With her June 19 comments, Royal negated a decision by her predecessors to grant EDF significantly higher rate increases than in previous years. In mid-2013, the state raised tariffs by 5 percent and announced the same increase would be applied on Aug. 1 this year. The move improved investor sentiment on EDF shares, which climbed 46 percent over the year to June 18.

Changes to how rates paid by 28 million households are calculated could be announced on Oct. 1 after consultations with the energy regulator and the country’s highest administrative court, Royal said in a statement on June 19.

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, John Viljoen

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