Why your electric bill probably won’t skyrocket
Upswing on the electricity market in France. In one year, the wholesale price has risen from 85 euros to over 1,000 euros per megawatt hour for 2023. A tenfold increase, enough to worry households already being tested by runaway inflation. Across the Channel, the news is also scary: the UK announced an 80% hike in energy prices in October.
Can such a scenario reach our limits? “The price of the bill is expected to increase in the coming months, but they will never be multiplied by 12,” said Lamis Aljounaidi, an energy economist and director of Paris Infrastructure Advisory.
Minimal part of the bill
The expert dissects an electricity bill for us, which we can roughly divide into three parts. First, the cost of distributing and transporting energy. The latter increases somewhat due to the renewal of a meanwhile ailing network, but in the order of 2-3% per year. Not enough to break the price of your budget. Second, the Contribution to the Public Electricity Service (CSPE), which helps fund renewable energy, the incremental cost of generating electricity in metropolitan areas, and the energy check for the humblest of households. This share will logically increase with the increase in precariousness in France, but even there there should be a limited increase.
Third, the price of energy itself. It’s twofold (courage, we’re coming to the end): the marketing cost – which tends to rise at the same rate as inflation (6% in about a year) and the cost of electricity itself, namely the cost of ARENH (the historic nuclear power at a globally stable price) and the famous market costs, precisely those multiplied by twelve.
A reasonable bill
As a result of this autopsy, “the proportion underlying the market price remains low, 5 to 10% of the bill. Only this proportion will be affected by the strong price increases observed on the electricity market,” Lamis Aljounaidi points out. Not enough to imagine adding a zero to your bill.
Sophie Meritet, lecturer in economics (with HDR), energy specialist, also reassures: “In July, the megawatt hour was already 800 euros and nobody was worried. It’s a back-to-school panic, but the bill shouldn’t go up that much.
The customs sign to the rescue
Especially with the customs sign. This should protect the French, at least for EDF customers. And thanks to the “blue tariff”, explains Patrice Geoffron, economics professor at the University of Paris-Dauphine: the price of electricity for private individuals is regulated by the authorities. At 174 euros per megawatt hour, the blue tariff is far removed from the 1,000 euros on the market.
Alternative providers such as Engie or Total are divided into two categories: those who operate at regulated electricity tariffs and are therefore also affected by the tariff label, and those who are solely dependent on the market price. For the latter, the bill could increase massively. Not to be multiplied tenfold either: “There is a “shock absorber” that has to do with the fact that EDF had to sell quantities of its nuclear power to other suppliers at “broken” prices,” specifies Patrice Geoffron.
The fact remains that many alternative providers are no longer accepting new customers or are even advising their own to return to EDF for the current year, informs Sophie Meritet.
Avoid the New “Yellow Vests”
Customs protection must end in early 2023. What just to postpone the problem? Raphaël Boroumand, economics professor at the Paris School of Business, cannot believe it: “An 80% increase like in the UK, which would plunge millions of citizens into energy poverty, seems impossible to me. We saw with the ‘yellow vest’ crisis how pennies of gas can get people out on the streets. In such a tense social context, the government will never let electricity bills soar that much. He was very clear, Economy Minister Bruno Le Maire and Renaissance MP President Aurore Bergé assured that electricity bills would not go from 30% to 50% in 2023 either. However, Prime Minister Elisabeth Borne warned on TMC this Tuesday evening that “at the beginning of 2023 there will certainly be price increases”.
In parallel with new aids, another solution can be envisaged: to drastically reduce consumption, aka the famous energy sobriety. Basic idea: if we stop buying electricity, it won’t cost us much. What if France was self-sufficient? Not easy. The country has already become a net importer and, given the state of its nuclear fleet – more than half of the reactors are shut down for maintenance or repairs – it is likely to be so again, specifies Patrice Geoffron, “especially in the case of cold winters”, sobriety or not.
Even if France was self-sufficient, “since the energy markets opened up, a significant part of the electricity has passed through the market,” Lamis Aljounaidi explains. So even if only French electricity is taken, part of the bill would be associated with this transition from 85 to 1,000 euros per megawatt hour.
Electricity, the most profitable form of energy
Despite these two nuances, “a reduction in consumption remains one of the most effective levers to combat rising prices and reduce bill growth. The less we buy, the easier it is for the state to provide aid,” says Raphaël Boroumand.
But is that the point of the story? “The trend is towards increasing electricity consumption, which is still the cheapest energy for households compared to gas or petrol,” supports Lamis Aljounaidi: “Therefore, it should be interesting for households to opt for electric heating to reduce their gas bill and switch to an electric or hybrid car to reduce their fuel costs. “Fully misinterpreted.