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Direct Energie Offers Discounts as France Raises Rates

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Oct. 3 (Bloomberg) -- Direct Energie offered discount power and gas online to compete with former monopolies Electricite de France SA and GDF Suez SA after regulated rates rose.

Households are eligible for rebates of as much as 10 percent on the state-set tariffs, it said on its website.

France allowed EDF to raise residential electricity rates 5 percent on Aug. 1 and a further 5 percent next year. Last year, the rates were the second-lowest in the European Union, adjusted for average income, according to Eurostat. France’s regulator agreed with companies such as Direct Energie that the low rates meant they couldn’t compete against state-controlled utilities.

“For years EDF was selling below cost of production through regulated rates,” Direct Energie Chief Executive Officer Xavier Caitucoli said today on BFM radio. “If EDF is allowed to cover its costs, competitors can compete with regulated rates. It’s an important change. The opening of the market to competition has been an obstacle course.” Direct Energie is gaining about 6,000 new clients a month, he said.

The company, which merged with Poweo SA, had 798,000 power and 227,000 gas customers in France last year, compared with the nation’s 35 million power and 11 million gas buyers.

Market Dominance

The markets are dominated by former monopolies, according to the latest Commission de Regulation de l’Energie figures. Alternative suppliers including Direct Energie had 8.3 percent of the household power market by volume at the end of June and about a fifth of the market for businesses. For gas in the same period, these suppliers had 12 percent of the household market and 45 percent of businesses, according to CRE.

Direct Energie buys about 80 percent of its power from EDF nuclear output and gas from spot markets, its 2012 report shows.

GDF Suez, the former gas monopoly, said this week it would push to gain more power customers after tariffs rose. The utility is offering households fixed prices for two years and is aiming for 5 million household electricity customers within five years compared with 1.6 million at the end of August.

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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