University

The dean of the College of Montpellier recommends a “return to a extra centralized mode of governance.”

François Mirabel, Dean of the Faculty of Economics at the University of Montpellier, is the author. Regulation of electricity and gas markets: Main economic issues (Editions Presse des Mines), currently being updated.

LA TRIBUNE – Does the economic crisis linked to the war in Ukraine or the maintenance of France’s nuclear fleet alone explain the increase in electricity prices?
François MIRABEL – It cannot be denied that the state of war and certain industrial obligations partly explains the rise in the price of electricity. But there are more structural reasons. They have been linked since 1998 through market liberalization in 2000, following the transposition of the European directive. Electricity is a public service, like telephony. However, if telecom liberalization has been good for the consumer, with significant reductions in prices, the same is not true for electricity. Certain characteristics made competition difficult, with EDF having a competitive advantage, particularly in terms of nuclear generation capacity. In this context, to allow new entrants to enter the supply market where the “mandatory operator” has a monopoly, electricity tariff setting mechanisms were partially and gradually linked to the cost of production to maintain more stability in market prices. time T depending on supply and demand. Thus, prices change from one hour of the day to the next without any relation to real production costs… We have artificially multiplied profit centers without any economic sense. This is under the dogma originally introduced by Article 90 § 2 of the Treaty of Rome* (Treaty establishing the European Union, editor’s note) In 1957.

However, France sees price increases limited to individuals and VSEs/SMEs. Why?

This is because the State applies a tariff shield for all regulated sales tariffs (blue rates, editor’s note), now only applies to small businesses and individuals. Financing this shield is very expensive for the State, but this does not apply to ETIs and large groups that pay for electricity based on single market prices.
How to get back to more consistency?

Let’s remember that EDF was created in 1946, because at that time there were so many electricity companies that it was difficult to operate them in a coordinated way… But today we are limited by the choice of competition policy. In my opinion, it is necessary to return to a more centralized mode of electricity management in each European country by adopting a tariff based on average production costs rather than on the last MW produced as is currently the case. In case of strong demand, as the European grids are connected and linked, we can thus prioritize the least polluting power stations and offer the best performance at the expense of the fuel, gas or coal-fired auxiliary power stations that everyone activates. for its part that drives up prices today.

Do you think going back to monopoly would be a good solution?

It would be hypocritical to present the events in this way because the European treaties do not allow it. In fact, we thought about competition before we thought about European energy policy. We pay the price today.

What is a reasonable alternative to the current situation?

In my opinion, a single buyer per country should offer a long-term purchase price to manufacturers. This is what the Energy Regulatory Commission enforces (CRE, editor’s note) for renewable energy. Why not for other resources? This choice of centralization was made, for example, by the UK when it ordered the EPR at Hinkley Point from EDF. The United Kingdom secured a supply tariff for 35 years! It can be an inspiring model…

* “Entities responsible for the management of services of general economic interest or of a fiscal monopoly nature shall be subject to the rules of this Agreement, in particular to the rules of competition, to the extent that the application of these rules is inconsistent with the law. or indeed the special mission assigned to them. »