Gas prices surge 12% in the middle of the legislative campaign

Between the two rounds of the legislative elections, the increase of almost 12% (11.7%) in the average price of gas for millions of French people starting this Monday risks becoming an explosive issue.

This increase, mainly due to the revaluation of gas network maintenance costs and the rebound in gas prices on the markets, was announced in March. After a respite of several months, the average annual gas bill will rise by 124 euros, going from an average of 1,060 euros in June to 1,184 euros on July 1. The Energy Regulatory Commission (CRE), the sector’s watchdog, the “average benchmark price” of kWh, which had been tending to fall in recent months, will be set at around 13 cents for July.

In detail, this 4-year revaluation of gas transmission costs is borne by the distribution network manager GRDF. This “toll”, billed to suppliers and accounting for a third of the bill, must be increased in the face of the increase in maintenance and modernization expenses for gas infrastructure, while allowing the integration of green gas into the pipes. And this is especially true since it is becoming more difficult to distribute these costs while the number of gas subscribers is falling: -197,000 between the end of 2022 and the end of 2023, according to the CRE.

Furthermore, this “reference price” is “indicative” and suppliers remain “free” to pass it on or not, underlines the CRE. It is possible to bring competition into play by referring, for example, to the online comparator of the Energy Mediator. According to the latter, however, “the vast majority of consumers will see this increase passed on to their bills”, i.e. most of the 10 million residential customers connected to GRDF.

RN’s proposal to lower VAT on gas, electricity and fuels

Needless to say, this increase will fuel debates as the issue of purchasing power is at the heart of these legislative elections. One of the levers put forward by the political parties is to lower energy bills. It is true that electricity prices have also jumped by 39% in one year, between January 2023 and January 2024.

The Macronist Renaissance party announced the creation of an “energy renovation fund” intended for the “middle” and “working class”, which would make it possible to insulate and decarbonize 300,000 additional homes by 202. In addition, Bruno Le Maire, Minister of Economy and Finance, announced that regulated electricity sales prices will decrease by 10 to 15% on February 1, 2025. A decrease made possible by the recovery of nuclear production and the development of photovoltaic panels.

For its part, the National Rally intends to lower the VAT rate from 20% to 5.5% on gas, electricity and fuels. This could be implemented through a draft amending finance bill. A measure that would cost around 10 billion euros per year according to the Montaigne Institute. However, the implementation of this measure will need to be approved by Brussels and could take much longer than expected. The rules on VAT are established by treaties. In the event of victory, the RN government will therefore have to enter into negotiations with other European countries to have this reduction accepted. And that is far from a done deal. Furthermore, it should not be forgotten that in matters of treaties, it is the signature of the President of the Republic that is required. In the event of cohabitation, Emmanuel Macron could be tempted to let this issue drag on.

For the New Popular Front (NFP), the idea is to shave off the margins of energy companies by lowering VAT to a rate that has not yet been revealed. But above all, the idea is to freeze by decree the prices of basic necessities, including electricity, gas and fuels. “Considering a reduction in VAT is only bearable if you freeze electricity prices,” justified Éric Coquerel, candidate of the New Popular Front in the legislative elections, during a debate on BFM TV. If you do not freeze prices, it is possibly the margins of companies that increase and employees who pay the price of inflation.” The left has not specified the level at which prices would be frozen. And here too, Brussels will have its say by checking whether competition at the European level is not distorted.