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According to Le Parisien newspaper, reporting on Wednesday, gas prices in France may be frozen this winter. It would certainly be welcome news for hard-pressed consumers if the usual winter uplift in gas prices did not come about.

Normally, from 1st October, French gas giant GDF Suez is permitted to raise consumer tariffs. In 2011, however, with the French Presidential election being a mere 8 months away, the French government will be doing all it can not to alienate consumers and so there may be political pressure for a price freeze. This would follow the French government having stepped in to call a halt on a proposed 7% increase in gas prices in July 2011 and it seems a safe bet that the French Minister of State for Industry, Eric Besson will not wish to see an autumn increase in gas tariffs.

GDF Suez anger

Any autumn freeze would not be to the liking of GDF Suez who claim that they make no profit on sales of gas. They have protested that if there is no increase in gas tariffs, then they will be selling gas at a loss. GDF Suez estimated that it would lose €340 million in the second half of their financial year if a rate freeze were to be imposed.

This argument cut no ice with the French consumer organisation CLCV. A spokesman for the organisation said that French gas consumers had seen price hikes of over 60% since 2004 whilst the price of natural gas on international markets had fallen by 30% over the same period, the result of the discovery of new gas deposits, advances in drilling techniques and the development of alternative resources such as gas extracted from shale.

A new method of calculating French gas prices in prospect

Given the apparent divergence between wholesale gas prices and prices to the consumer, which, at times seem to move in opposite directions with there never being anything more than marginal price decreases in the consumer’s favour, the French regulatory body for energy prices the Commission de régulation de l’énergie is currently looking at how the price of gas is calculated at the request of the French government. It seems likely that the CRE will put forward a formula for price calculation that better reflects changes in short term market prices. It can never be assumed, however, that any new formula would benefit the consumer. If an economic recovery gathers any steam, then it can be almost guaranteed that gas prices will rise along with other energy costs. A winter freeze on prices may simply be a political postponement of the day of reckoning.