On November 19, 2024, the French Competition Authority (“FCA”) submitted a Report (“FCA Report”) to the Ministers for Energy and the Economy, on the national regulated tariffs for electricity (tarifs réglementés de vente d’électricité – “TRVs”).[1]  The FCA recommended to take practical measures to prepare the termination of the TRV mechanism, anticipating regulatory changes at the national and European levels in favor of market-based pricing.

Background

TRVs are regulated tariffs set by the French government to ensure stable and affordable electricity prices for consumers.  Electricité de France (“EDF”) and local distribution companies (entreprises locales de distribution  – “ELDs”) are required to supply electricity at TRV level to eligible consumers[2] who opt for TRVs instead of market-based prices.[3]  TRVs are calculated based on various cost components and are adjusted once or twice a year.[4]

Under the European Union’s (“EU”) impulse, French retail markets for the supply of electricity have been liberalized between 1998 and 2007, allowing EDF and ELDs to supply electricity at market-based price, and new suppliers to enter the market.  In spite of market liberalization, TRVs continue to apply due to various public policy goals such as security of supply, social and territorial cohesion, and consumer protection.[5]  Today, TRVs remain the most widely used offer on the French market, with 59% of individual and 35% of small non-household consumer subscriptions.[6]

The FCA’s Findings

TRVs constitute a public intervention in price fixing which must comply with the conditions set forth in Directive 2019/944.[7]  Such intervention must be transitional and reserved to consumers that are vulnerable or in a precarious energy situation and should not obstruct free and effective competition.[8]  According to the FCA Report, TRVs fail to meet these requirements as they (i) remain accessible to a broad range of consumers, (ii) do not participate in the development of a more efficient competitive market, (iii) and appear to have no foreseeable ending.[9]

The FCA Report also notes the growing gap between the TRV mechanism and upcoming regulatory changes in favor of market-based pricing at retail level.  More specifically:

  • At national level, the regulated access to historical nuclear energy[10] is planned to end on December 31, 2025, providing an opportunity for an in-depth review of the organization of electricity markets in France; and
  • At European level, the European Commission will assess by the end of 2025 the need to amend (orabolish) existing European rules governing Member States’ powers to regulate tariffs on retail markets for the supply of electricity.[11]  Since 2021, the Commission has expressed its disagreement with the French authorities’ position that  “it is possible to reconcile general price regulation […] with a reportedly competitive retail market”.[12]  The Commission therefore “invite[d] the French authorities to reduce the scope of such retail price regulation and to limit its duration to a transitional period […]”.[13]

According to the FCA Report, TRVs have hindered the development of alternative, more efficient targeted public interventions to address the different objectives that TRVs were initially aimed to foster.  The mechanism has, among others:

  • failed to provide the lowest prices to consumers and did not prevent the increase in retail prices.  The FCA Report contends that competitive dynamics in the market would be sufficient to guarantee consumer prices below TRVs under normal market circumstances (i.e., absent an energy crisis);[14]
  • failed to limit the State’s intervention, for instance during energy crises.  In these instances, TRVs have been supplemented by other ad hoc public policies (e.g., energy vouchers to vulnerable consumers);[15] and
  • undercut, via the price stability it confers, positive effects of price signals in the market.[16]  According to the FCA Report, price signals could facilitate the oversight and management of electricity demand, to the benefit of the energy transition.  Additionally, the absence of price signals blurs consumers’ views of their energy consumption costs, reducing their incentive to adjust their energy consumption.[17]

The FCA Report further concludes that TRVs have affected effective competition on the retail electricity market in France, given that they have inherently favored EDF by not incentivizing consumers to look at competitive offers due to a “status quo bias” in favor of the historical offer and a belief that TRVs are low or stable.[18]

FCA’s Recommendations

In light of these findings, the FCA recommends to prepare for the termination of TRVs, while maintaining their public policy goals.  Should TRVs be discontinued, the FCA suggests the following actions (inter alia):

  • continue efforts to meet territorial cohesion in areas served by ELDs, in particular by lowering barriers to entry in terms of information systems;[19]
  • establish a special regime to ensure continuity of electricity supply for vulnerable consumers by designating one or several suppliers of last resort, akin to what has been introduced in the gas sector;[20]
  • improve the consumer protection framework by replacing TRVs with more targeted instruments, including the development and promotion of the comparison tool of the French energy ombudsman which provides a benchmark index helping consumers to choose between the available market offers;[21] and
  • conditionally allow energy suppliers to propose offers with termination penalties (e.g., minimum contract duration or termination penalties that decrease over time),[22] thereby contributing to a fairer risk-sharing between suppliers and consumers while being less detrimental to competition than TRVs.[23]  

If the French government decides to maintain TRVs, the FCA Report recommends alternative measures to stimulate competition, including among other things:

  • introduce the possibility for all electricity suppliers (not only EDF) to offer TRVs;[24] and
  • use a distinct brand name for EDF’s market-price offers from the one used for EDF’s TRVs to favor the development of competitive offers and reduce the risk of market abuse.[25]

Finally, the FCA recalls that while targeted measures are generally preferred, EU law leaves great scope for public intervention on the retail electricity markets in time of crisis.[26]

Conclusion

Electricity retail markets across the EU are transitioning towards the end of energy regulated tariffs.[27]  Certain Member States have already started amending their legislation to anticipate upcoming changes in EU law.[28]  The French energy regulator (the Commission de regulation de l’énergie ) took an opposing view recommending that TRVs be kept for another five years.[29]  The French government has also adopted a law expanding the number of consumers eligible to TRVs as of February 2025.[30]  In light of this and the current political and social climate in France, which places a strong emphasis on consumer protection, it seems unlikely that the FCA’s recommendation will be followed in the short term, but the debate on electricity regulation will certainly be picked up at political level in the coming months.

[1] FCA’s evaluation report of November 12, 2024, on the regulated electricity sales tariff system  (Rapport d’évaluation du 12 novembre 2024  sur le dispositif des tarifs réglementés de vente d’électricité), available here.

[2] TRVs are available to residential and small business customers.

[3] TRVs were established in 1946 by the law nationalizing the electricity and gas sectors in France and granting a monopoly for the supply of electricity and gas to EDF and ELDs.

[4] FCA Report, p. 8.

[5] See FCA Report, para. 41.  The FCA has identified several public policy goals justifying the existence of regulated tariffs in France including: combatting energy insecurity; stability of retail prices; maintaining low prices; and a fair return on investment in the nuclear infrastructure.

[6] See FCA Report press release.  See also FCA Report, para. 71.

[7] Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU (recast), OJ 2019 L 158/125 (“Directive 2019/944”), article 5.

[8] FCA Report, paras. 13-17.  See also inter alia Directive 2019/944, recital 23 and article 5.

[9] FCA Report, para. 20.

[10] Under this system, retail electricity suppliers can buy wholesale electricity produced by EDF’s historical nuclear plants at a fix rate.

[11] See e.g. Directive 2019/944.

[12] FCA Report, para. 22.  See also Commission opinion of 27.8.2021 pursuant to Article 20(5) of Regulation (EU) No 2019/943 on the implementation plan of France, C(2021) 6182 final, p. 14.

[13] FCA Report, para. 24.  See also Commission opinion of 27.8.2021 pursuant to Article 20(5) of Regulation (EU) No 2019/943 on the implementation plan of France, C(2021) 6182 final, p. 15.

[14] FCA Report, paras. 59-61.

[15] FCA Report, paras. 150-157.

[16] FCA Report, paras. 113-119.

[17] Ibid.

[18] FCA Report, paras. 172-173.

[19] FCA Report, recommendation n°1 and para. 52.

[20] FCA Report, recommendation n°3 and paras. 64-27.

[21] FCA Report, recommendations n°4 and n°5.

[22] FCA Report, recommendation n°7.

[23] FCA Report, para. 214.

[24] FCA Report, recommendation n°9.

[25] FCA Report, recommendation n°10 and paras. 254-260.

[26] FCA Report, paras. 35-37, and 157.

[27] FCA Report, paras. 39-40.  This trend is not specific to retail markets for electricity.  Member States’ public interventions in the price setting for the supply of gas is governed by the same set of principles.  See Directive (EU) 2024/1788 of the European Parliament and of the Council of 13 June 2024 on common rules for the internal markets for renewable gas, natural gas and hydrogen, amending Directive (EU) 2023/1791 and repealing Directive 2009/73/EC (recast), OJ 2024 L, article 4.  In France, regulated tariffs for gas are abolished since 2023.

[28] Portugal is for instance aiming at terminating regulated prices offered to all consumers by December 2025, with the exception of alternative mechanisms for specific categories of consumers (e.g., existence of a social tariff discount for vulnerable consumers).  In Italy and Slovakia, the eligibility for regulated tariffs has recently been limited to vulnerable consumers.  See FCA Report, p. 19 and para. 40.

[29] See CRE report on the evaluation of regulated electricity sales tariffs (Rapport de la CRE relatif à l’évaluation des tarifs réglementés de vente d’électricité), November 2024, available here.

[30] Under the previous legislation, eligibility for TRVs was restricted to sites with a contracted power demand of less than 36 kVA.  In February 2025, sites of residential and small business customers with power demand exceeding this threshold will become eligible for TRVs.