Electricity prices are exploding: how will your bills be affected?

The tariff shield is due to expire in December 2022. (© Ralf / Adobe Stock)

Electricity prices are rising, and consumers are worried.

In the wholesale market (where suppliers buy energy, Ed.), prices exploded. Those of electricity for 2023 broke a record for France on Friday August 26, reaching more than 1000 euros per megawatt/hour (MWh), compared to about 85 euros per MWh a year ago. That’s a price multiplied by 11.7.

Enough to have a cold sweat thinking about his next bills.

Why did the price of electricity increase?

It is necessary to first look at why the price of the electricity exchange has increased.

The price of the electricity set depends on the type of fuel used in the last power plant that must be activated (“call”) to produce the amount of electricity sufficient to meet the demand at that moment. If the needs exceed the production already covered by renewable energies or with nuclear power plants, logically the thermal, gas or even coal power plants should be “called”.

EDF

And there, the war in Ukraine became an important thing, because the thermal power plant uses gas to generate electricity.

However, the price of gas has increased this week to historical levels, more visible since the beginning of the Russian invasion of Ukraine, that is to say more than 300 euros per MWh. And like Russia delivers less gas to Europeprices can remain very high.

War only partly explains this development. The French nuclear fleet, ie 56 reactors, is struggling a bit.

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Currently, 32 nuclear reactors were shut downincluding 12 for corrosion problems. Thursday, August 25, EDF extended the shutdown of four reactors for these reasons.

What is the tendency of an electricity market where actors speculate on the situation and lead to higher prices.

However, although this increase in wholesale prices is impressive, it is not new: EDF has already reported an increase in electricity prices with the post-covid economic recovery.

What is the effect of the bill?

The effect is not the same for every consumer. In fact, in France there are several types of tariffs for electricity for individuals.

  • The regulated tariff (EDF blue tariff), “fixed by the public authorities and proposed by the historical suppliers, EDF and the local distribution companies”, says the site life-public. These rates are set once or twice a year.
  • The fixed priceits price is the same throughout the duration of the contract.
  • The indexed pricewhich around the world follows the evolution of regulated prices.
  • The price with the evolution or indexation, “so the evolution of the price is defined in the contract”, determines the place of the national energy intermediary, energy-info.

Good news for consumers who choose regulated tariffs: the government’s “tariff shield”, decided to fall in 2021, helped limit the increase in electricity prices to 4%. No increase.

On the other hand, if you choose a rate with evolution, you should monitor your contract to check if the increase is not applicable.

Offers that are indexed to the markets have risks because their price changes rapidly according to supply and demand, seasonality and geopolitical context.

energy information

However, it is always possible to return to the regulated rate. “You just have to ask the historical supplier, usually EDF. This is the principle of innovation”, indicating energy information.

And next year?

As the tariff shield should ends at the end of the year, The question is legitimate: what will happen to the price of electricity on January 1 next?

In an interview with ParisianPrime Minister Elisabeth Borne promised that the executive would not don’t let energy prices explode for households.

After the tariff shield, “we will save devices to reduce energy prices […] and we will take specific measures to support the most vulnerable”.

The French can be confident, we will stop the increases.

Elisabeth BornePrime Minister

During a trip to Metz for a meeting with most executives, the Minister of Economy Bruno Le Maire assured that the increase of electricity and gas in 2023 be “contained”.

Earlier, he pointed out that nothing will happen no “catch-up” at prices that are now locked in 2023, and that the increases will also be placed on gas.

Guaranteed by the government

Always to reassure, Bruno Le Maire drew the outlines future help for individuals and businesses.

Next year, for the most modest households, there will be energy vouchers to help those who struggle to pay their energy bills.

Bruno the MayorMinister of Economy

Such checks, for an amount between 48 and 277 euros, are already given to low-income households in 2022 to help them pay the energy bills of their homes.

For businesses, the Minister of Economy has shown that he wants to simplify access to grants for those who do not benefit from a regulated or preferential tariff for electricity and have difficulty paying their energy bills.

Also in Metz, the Minister for Energy Transition Agnès Pannier-Runacher asked companies in the tertiary sector to save energy so that electro-intensive industries can continue to operate normally.

“We can act on the temperature of offices, we can act on the ventilation of shopping centers”. The end of energy abundance.

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