2024 Everything you need to know about France's electricity price hike

On February 1, 2024, electricity tariffs in France will increase as part of the gradual phasing out of the tariff shield implemented by the Government in 2021. What impact will this have on your bills? How are electricity tariffs determined? Micco will provide all the information on this matter.

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Table of Contents

1. Reasons for the Electricity Tariff Increase
2. Calculation of Electricity Tariffs
3. Factors Influencing Electricity Tariffs
4. Taxation and Costs of Electricity
5. Summary

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1. Reasons for the Electricity Tariff Increase

1. Background
   • Electricity prices are set by the government twice a year, in January and August.
   • The Minister of Economy announced a gradual increase in electricity tariffs for households and professionals starting from February 1, 2024, aiming to eliminate the tariff shield by February 2025 (originally planned to end by the end of 2023).
2. Reasons for Increase
   • Compared to the base tariff set in August 2023, the expected increase in electricity tariffs from February 1, 2024, is as follows:
     • 8.6% increase for the base tariff;
     • 9.8% increase for the "peak-hours/off-peak hours" tariff.
   • For businesses, the increase will range between 5.2% and 8% depending on the contracts.
3. Tax Adjustments
   • This increase results in a reassessment of the domestic consumption tax (TICFE), which will increase to €21 per megawatt-hour (MWh).
   • In 2022 and 2023, TICFE had been reduced to €1 per MWh to control prices and limit the increases to 4% in February 2022, 15% in February 2023, and 10% in August 2023.
4. Calculation Method Changes
   • This fiscal measure decided by the Government is outlined in the 2024 Finance Law, which specifies that the price increase of the regulated tariff of EDF (Blue tariff) must remain below 10%.

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2. Calculation of Electricity Tariffs

1. Components of Electricity Tariffs
   • Electricity tariffs include subscription fees and consumption costs. The former is fixed, and the latter varies based on the recommendations of the Energy Regulatory Commission (CRE).
2. Influencing Factors
   • Several factors influence the price per kilowatt-hour:
     • Various taxes: TICFE (domestic tax on final electricity consumption, formerly known as CSPE), CTA (contribution to network costs), and value-added tax (VAT);
     • Production, storage, supply, and marketing costs;
     • Transmission costs;
     • Natural gas prices (part of the electricity produced or imported comes from gas-fired power plants);
     • Cost of CO2 quotas.
3. Pricing Mechanism
   • The Energy Regulatory Commission proposes a revision of EDF's regulated electricity tariff, known as the "Blue tariff," twice a year. This tariff applies to the majority of households.

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3. Factors Influencing Electricity Tariffs

1. Market Trends
   • The European wholesale market affects electricity prices.
   • The significant price increase since 2021 led to the implementation of the tariff shield, impacting household bills.
2. Electricity Production and Supply
   • Increased production from French nuclear power plants led to a decrease in European wholesale market prices in 2023, providing the background for the removal of the tariff shield.

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4. Taxation and Costs of Electricity

1. Tax Adjustments
   • The TICFE per MWh is adjusted to €21 from February 1, 2024.
   • This fiscal measure, outlined in the 2024 Finance Law, allows for the price increase of the electricity surcharge within certain limits.
2. Taxation Components
   • TICFE, CTA, and VAT are the main taxes on electricity.
   • Production, storage, supply, and marketing costs, as well as transmission costs, are among the main factors determining electricity prices.

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5. Summary

In February 2024, electricity tariffs in France will increase as part of the gradual phase-out of the tariff shield. The reasons for the increase include adjustments in tax policies and the influence of market trends. The composition of electricity tariffs is complex, incorporating various taxes and costs, with TICFE being one of the primary factors influencing the increase. Understanding this information is crucial for comprehending the reasons for and impacts of the electricity tariff increase.

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