French plan to reduce energy bills prompts Big Brother outcry


Tara Patel,Bloomberg News
Saturday 20 October 2012 09:05 BST
Francois Hollande: Energy plans have given rise to Big Brother criticisms
Francois Hollande: Energy plans have given rise to Big Brother criticisms (Getty Images)

Heating a French home could soon require an income tax consultation or even a visit to the doctor under legislation to force conservation in the nation's $46 billion household energy market.

A bill adopted by the lower house this month would set prices that homes pay based on wages, age and climate. Utilities Electricite de France and GDF Suez will use the data to reward consumers who cut power and natural gas usage and penalize those whom regulators decide are wasteful.

"It's Orwellian," opposition lawmaker Daniel Fasquelle said by telephone. "The law will create huge inequalities and infringe on people's individual freedoms. It won't work."

Socialist President Francois Hollande is pushing boundaries of privacy and privilege in carrying out a campaign promise to reduce energy costs. France, which built the world's biggest reliance on nuclear power as other nations buckled under public anxiety over atomic energy, is now seeking support to reward homes for "negawatts," or not using a kilowatt of power.

The law would be unique to France and is symbolic to the Socialists, a government official who declined to be identified said Thursday. Households bought 35 billion euros ($46 billion) of energy in 2011, including power, gas and other heating fuels.

The legislation drew criticism from trade unions and industry groups. It will add layers of bureaucracy to a power system already attacked in court and antitrust probes for being oppressive for customers and competitors of EDF and GDF Suez, the former state monopolies that still dominate supply, opponents said.

While the government said the changes won't cut earnings at EDF and GDF Suez, the uncertainty may weigh on their shares that investors have already marked down by 1.2 percent and 2.2 percent, respectively, in the past three months while the Bloomberg European Utilities Index gained 5.2 percent.

The proposed law was adopted by the National Assembly on Oct. 4 and is set for Senate debate later this month. Opposition from Communist members has pushed a Senate commission to postpone its examination until Oct. 23 so some revisions can be made. The draft contravenes the principle of equal access to energy across France and should be completely revised, Communist senators said in a statement late yesterday.

EDF and GDF Suez would be the most exposed because of their dominant positions. EDF supplies power to 28 million household clients in France, while GDF Suez provides gas to 9.4 million customers, giving them respective market shares of 93 percent and 90 percent by volume, according to the regulator.

"It won't be beneficial for the utilities, it will be neutral at best," Emmanuel Retif, analyst at Raymond James Euro Equities in Paris, said by e-mail. "If it were to be beneficial, heating bills would have to rise and that's not what the government is trying to do."

Investor wariness of the planned progressive and social power rates stems from 4.5 billion euros in payment arrears that have accumulated on EDF's books as of June 30, mostly because of renewable energy subsidies.

The draft legislation encourages households to use less energy either by changing their habits or insulating their homes. Thrifty energy consumers will be rewarded with lower rates while wasteful ones will have to pay more. The law is supposed to be financially neutral for utilities, according to the draft.

Power and gas bills in France and elsewhere typically vary according to the size of a dwelling, type of heating and whether it's on a windy Alpine ridge or the warmer Mediterranean coast.

The new French law will add income and the number and age of occupants to the mix. Having a medical condition that requires electricity-powered equipment like respirators or wheelchairs will also enter into the equation.

"The principle is good, but the law raises a whole series of practical problems," Nicolas Mouchnino, head of energy and environmental issues at French consumer group UFC-Que Choisir, said by phone. "It's very difficult to tell the difference with any degree of certainty between energy use that is essential and that which may be superfluous."

The rules could make relations between property owners and renters more antagonistic and open the way for fraudulent claims about energy use, he said.

The law as it stands would create an incentive system for energy use. Households would be granted a base volume of power or gas considered appropriate for the dwelling. This volume would be determined by fiscal and social security authorities from tax returns and other documents such as income statements, studies of local weather and medical records.

Households meeting certain criteria could be among 4 million — a fourfold increase under the planned law — that will be eligible for reduced "social" rates for energy. The rest will have their prices adjusted according to volumes consumed.

The government and regulator will set the reward and penalty incentives under which households using less than their allotted base volume of energy get rebates while those surpassing the limits pay higher rates. The difference could be as much as 60 euros a megawatt-hour, according to the draft.

This could translate into penalties of 600 euros a year for a home "leaking heat" compared to a well-insulated one, according to opposition lawmaker Antoine Herth. Environmental Minister Delphine Batho told senators the government will provide its own simulations of the effects on household bills, which will be "reasonable" so as to act as an incentive.

Renters will be able to deduct from their monthly payments a part of the higher costs of heating a home deemed to have low energy use efficiency, maybe because it's poorly insulated, while the elderly or households with certain yet-to-be specified heating installations will get higher base volumes of energy.

"It's so complicated I don't think it will ever be implemented," said Laurent Langlard, a spokesman on energy issues for the Confederation General du Travail. The biggest union in the energy sector backs lower energy rates for consumers, but this plan is "unworkable," he said.

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