For a fair and efficient energy transition: Time to end regulated tariffs for electricity

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

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Member States that stubbornly defend regulated tariffs cannot, at the same time, profess to be champions of the energy transition at international climate summits, writes ANODE. [Paul L Dineen / Flickr]

This article is part of our special report Electricity prices.

Whilst wanting to protect regulated tariffs at all costs, France has committed itself to a coalition of the lowest bidders on climate issues, in particular with countries defending the coal industry, writes the ANODE.

The association ANODE (Association Nationale des Opérateurs Détaillants en Energie), founded in 2006, brings together alternative suppliers of electricity and gas in France.

In November 2016, the European Commission presented its proposal of Clean Energy Package with the aim of creating a coherent European framework to empower consumers and facilitate the energy transition.

Two years later, the Electricity Market Design Directive is being discussed in trilogues, and one crucial point could undermine the proactive and ambitious measures proposed so far: the possibility of maintaining regulated tariffs for electricity among the EU’s Member States.

And yet the Commission understood this from the beginning.

Regulated tariffs have a falsely protective image and are neither compatible with the energy transition, nor in consumers’ best interests.

Why is the focus still on maintaining regulated tariffs?

Regulated tariffs are presented by their advocates as a protection for consumers. Yet, they are still being offered to some companies. By keeping public intervention on tariffs of electricity, with a high risk of not covering real costs, Member States are sending the wrong signal regarding energy efficiency, with consumers unaware of the true costs and measures they could take to consume less, and in a better way.

Regulated tariffs prevent consumers from choosing market-based offers which may provide them with new opportunities through innovative services. Indeed, competition is the only real source of price moderation and innovation.

By trying to protect all consumers, we are failing to address the energy poverty of the most vulnerable households.

Regulated tariffs are not social tariffs! A social policy that applies to all consumers, vulnerable or not, is inherently ineffective. And yet, Member States must implement strong policies in order to fight this phenomenon. Public support already exists in some countries, such as financial aid for the payment of energy bills. All households that face energy poverty, regardless of their supplier and their offer, can benefit from these financial aids, which are not linked to regulated tariffs. These kind of social policies should be developed to benefit all vulnerable European citizens.

There is no legitimacy in wanting to protect the old monopolies through regulated tariffs

Maintaining regulated tariffs allows historical incumbents to protect their market shares without making any economic and organisational effort to improve efficiency, productivity and innovation. They therefore have no incentive to reduce their costs or propose new offers and services. This conservative approach to regulation has a negative impact on both consumers and communities.

By supporting historical monopolies, Member States create barriers to competition and prevent the completion of the European internal market. Indeed, those Member States hinder the establishment of European operators in their national market due to the maintenance of tariff “frontiers”. By doing so, they preserve their former national monopolies to the detriment of the other Member States that are developing the EU’s Energy Union.

The energy transition deserves better than unholy alliances in the Council

Member States that stubbornly defend regulated tariffs cannot, at the same time, profess to be champions of the energy transition at international climate summits.

While the Commission has proposed to end regulated tariffs and the European Parliament wants to restrict their applicability to households facing energy poverty, some Member States are still defending regulated tariffs for all consumers – with France taking the lead.

With France firmly committed to the energy transition, maintaining regulated tariffs testifies to the inconsistency of the French position and its favouring of its former energy monopoly. Regulated tariffs prevent the development of competition and innovation, while maintaining EDF locked in a model that has run out of steam.

Whilst wanting to protect regulated tariffs at all costs, France has committed itself to a coalition of the lowest bidders regarding climate issues, in particular with countries who defend the coal industry. These inconsistencies lead to grotesque alliances, to the detriment of European ambitions and consumers.

Institutions must have the courage to turn their words into actions

Just a few weeks before the end of the ongoing discussions, we are launching an appeal to the European Parliament and the Council to defend the interests of consumers and to further promote Europe’s energy transition. It is time to stand by our current commitments and to avoid, through this Electricity Market Directive, compromising the efforts made so far in the Clean Energy Package.

Postponing the deadline for the end of regulated tariffs by more than the implementation deadline would be farcical, resulting in the maintenance of the status quo until new European legislation is drafted. It’s time to act.

The compromise that will be reached will send a strong signal for the future of energy in Europe – a signal that has long been awaited by all actors favouring the development of the energy transition. It is therefore crucial not to miss such an opportunity.

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