France's CRE suggests industrial gas switch tender

OREANDA-NEWS. January 21, 2016. French energy regulator CRE has recommended arranging a tender for gas supply to the industrial consumers that have not switched from their historic contracts.

A French energy law from March 2014 prescribed non-residential French gas consumers with over 30 GWh/yr of demand and apartment buildings consuming over 150 GWh/yr to switch from regulated gas prices to a market offer by 31 December 2015.

Around 20,000 industrial sites — 18pc of all the above consumers — moved to a six-month transitional regulated price on 1 January. At the end of this transitional period, the CRE has recommended conducting a tender to supply those that have not yet switched to a market-based offer.

This mechanism, which would assure continued supply to these consumers after the end-of-June deadline, would have the benefit of opening the market to more competition, the regulator said. There would be a limit on the number of lots that can be won by a single supplier.

There is a risk that a consumer could wait out the transitional period and take a potentially lower price at the tender, it said, and this could discourage the client from switching to a market-based supply earlier than the deadline. But suppliers would be encouraged to move remaining clients to market-based offers to avoid supplying gas based on a tender price.

Revenues from gas sold through the tender would be capped by the regulator.

The supply tender was favoured by the regulator over allowing an indefinite extension to the transitory period. If the transition period is extended, the regulator would be able to set progressively higher regulated prices, which could reach up to 50pc above the price established for the January-June transition period.

The French energy and economy ministry would set the average increase in the regulated price for each quarter.

But this mechanism risked maintaining supply monopolies in France and restricting the opening of the market, the regulator said.

Should the French government choose the option to extend the transitional offer, the CRE has recommended a minimum increase in the regulated tariff of 20pc from 1 July. And it recommended that a timetable for price increases is released before July and a limit to the transitory offer to one year from 1 July.