Gas and electricity prices: the government’s dilemma for the tariff shield

Attention, sensitive file. While he has been boasting for months of having taken costly measures to protect the French from inflation , the government must accelerate its reflection on the follow-up to be given to the most emblematic of them, the tariff shield on the price of gas and electricity. With the concern expressed in the majority of a gradual release of this device, while ensuring that price increases remain reasonable.

Last fall, Jean Castex’s team took two strong measures to counterbalance the effects of inflation which was already making its effects felt on energy prices: a freezing of the gas price at its then level and an increase in electricity limited to +4% in 2022. The first system should be finished at the end of the year and the second next February.

Records for gas

Officially, the executive is giving itself some time to decide what to do next. “Everything will depend on the level of energy prices at the end of the year,” argues the government. But the current levels are enough to give Bruno Le Maire, the Minister of the Economy, a few cold sweats: this week, the price of gas has reached new heights the MWh delivered to Rotterdam peaked at 295 euros on Monday.

A development that will increase the cost of this tariff shield for 2022 – 16 billion for electricity and 4.7 billion for gas at the last count made in July before the new surge in prices – and puts pressure for next year .

However, the status quo seems difficult to envisage. “We had to absorb part of the shock, but I think we have gone a little too far and that it is not a good idea for the State to bear the entire cost of the energy crisis. Maintaining the gas price freeze would be contradictory with the message of sobriety, ”judge Philippe Martin, dean of the School of Public Affairs at Sciences Po.

Aid targeting

In fact, within the majority, we are aware that an evolution is necessary. “France is the country whose state has provided the strongest support, and this will continue. But we will not be able to stay forever in this system of tariff shield and gas price blocking, we will have to organize a gradual exit and move towards more targeted devices, ”assures Jean-René Cazeneuve, Renaissance deputy and general rapporteur of the budget at the National Assembly .

In addition to low-income households, this targeting should also concern, in his view, industries that consume a lot of gas, which currently benefit from a special system which is also due to end at the end of the year. “At a time when we are talking about the necessary reindustrialisation, we must preserve competitiveness”, he insists.

However, the path is narrow for the government, which wants to avoid social tensions similar to those experienced in Germany and above all Great Britain . “There will be, as every year, an increase in electricity and gas prices in 2023. But it is too early to say its level. Our goal is also to refocus aid on those who need it most, ”we explain at Bercy.

Red line

An increase in bills of 70% to 80% – similar to that in germ in Great Britain for the month of October, if the future government does nothing – of course seems politically unthinkable for the executive. He will therefore have to navigate as accurately as possible according to the evolution of the courses. “A 10 to 20% increase in the price, coupled with a boost for the most modest with a strengthening of the energy check, could be a solution. The shock would remain dampened, but there would still be a price signal to reduce consumption, ”says Philippe Martin.

For the economist, this gradual exit from the tariff shield cannot however be the only response to the current crisis. “In the spring, European states had asked the Commission to work on establishing a ceiling price for the purchase of Russian gas at continental level. France should push this file, ”he judges.