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Hollande Faces Defeat on Energy Price Caps as Gas Suppliers Sue
French President Francois Hollande has made capping energy prices a centrepiece policy to help households pressed by stagnant economic growth. It’s a campaign he’s likely to lose.
The government capped the latest rise in natural gas at 2 percent, far below the 7 percent former monopoly GDF Suez SA deemed necessary to cover supply costs. The move is a necessary part of “protecting consumer purchasing power,” Finance Minister Pierre Moscovici and Environment Minister Delphine Batho said this week.
The problem for Hollande is that judges are likely to say consumers have to pay higher prices. For the past year, a convoluted price-setting system has emerged in France that has seen GDF Suez and rivals sue the government over increases they deem too low to cover costs and enable competition in the domestic market. The country’s highest court has consistently ruled in favor of the companies.
..
The French government’s ability to control prices stems from the past monopoly positions of GDF Suez (GSZ) and power utility Electricite de France SA, which remain dominant on the domestic market more than five years after it was thrown open to competition.
Other than setting tariffs, Fourquet said, the government can allow shale gas development to boost local supply, an option Hollande has rejected, or try to encourage home insulation to lower energy demand over the longer term.
http://www.bloomberg.com/news/2012-09-20/hollande-faces-defeat-on-energy-price-caps-as-gas-suppliers-sue.html
The government capped the latest rise in natural gas at 2 percent, far below the 7 percent former monopoly GDF Suez SA deemed necessary to cover supply costs. The move is a necessary part of “protecting consumer purchasing power,” Finance Minister Pierre Moscovici and Environment Minister Delphine Batho said this week.
The problem for Hollande is that judges are likely to say consumers have to pay higher prices. For the past year, a convoluted price-setting system has emerged in France that has seen GDF Suez and rivals sue the government over increases they deem too low to cover costs and enable competition in the domestic market. The country’s highest court has consistently ruled in favor of the companies.
..
The French government’s ability to control prices stems from the past monopoly positions of GDF Suez (GSZ) and power utility Electricite de France SA, which remain dominant on the domestic market more than five years after it was thrown open to competition.
Other than setting tariffs, Fourquet said, the government can allow shale gas development to boost local supply, an option Hollande has rejected, or try to encourage home insulation to lower energy demand over the longer term.
http://www.bloomberg.com/news/2012-09-20/hollande-faces-defeat-on-energy-price-caps-as-gas-suppliers-sue.html
