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France Won’t ‘Sharply’ Raise Household Natural-Gas Prices

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Nov. 30 (Bloomberg) -- The French government won’t “sharply” increase regulated natural-gas prices for households, according to Industry Minister Eric Besson.

“There are several scenarios on the table,” including that prices rise slightly or moderately, Besson told RTL radio today. “The only scenario that I have pushed aside is a sharp rise in the price of gas.”

Prime Minister Francois Fillon will likely decide on new rates by the end of the week, he said.

France’s highest court has suspended a government decision to freeze regulated gas prices for consumers and ordered the energy ministry to set new tariffs within a month.

The ruling has thrown into question the way regulated prices are set in France for GDF Suez SA, the former monopoly that is still 36 percent state-owned. The government, facing presidential elections next April and May, is under pressure from consumers not to raise tariffs.

“Between the possibilities of a slight increase or a moderate one, it’s up to the prime minister to decide,” Besson said, adding that the government will respect the court’s decision.

The government in April froze household gas prices for a year, a decision the country’s energy regulator ruled should be reversed from Oct. 1 to allow GDF Suez to cover supply costs. The regulator said the rates should have been raised Oct. 1 by 8.8 percent and 10 percent, depending on the type of household consumer. Instead the government kept prices unchanged for households and raised them 4.9 percent for businesses.

Price Cap

Suppliers competing with GDF Suez, grouped under an organization called Anode and including Direct Energie SA and Poweo, have asked the court to lift the price cap because regulated rates weren’t high enough to cover costs of supply and hindered competition.

“What counts for us is that we get a clear set of rules on rates. The current system is impossible,” Fabien Chone, deputy chief executive officer of power retailer Direct Energie, said in an interview today. “Under the best case scenario we think we will get an increase of 5 percent or 6 percent as a result of this court case.”

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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