Thursday, September 21

France Caps Electricity, Gas Price Hikes at 15% for Next Year

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(Bloomberg) — France said it will limit energy prices rises to 15% for households from the start of next year to ease the burden of the energy crisis on consumers.

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The caps will cost the government a net 16 billion euros ($16 billion) in 2023, Finance Minister Bruno Le Maire said. Prices would have risen by 120% without the limit, he said. The state will also continue handing over subsidies, with a one-time payment of up to 200 euros each going to 12 million poorer households, Prime Minister Elisabeth Borne said.

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The French government was among the first in Europe to implement measures shielding consumers and companies from a surge in energy prices, starting in October 2021. While the caps on electricity and gas prices proved effective in dampening inflation compared to the rest of the euro area, the cost to the state spiraled after Russia invaded Ukraine.

With public finances already under pressure as the growth outlook deteriorates, the government aims to rein in the support while avoiding to further hurt the economy. President Emmanuel Macron must also navigate a difficult political backdrop after losing his outright majority in the National Assembly and as opposition parties are mulling marches to demand higher wages.

A threat of rationing continues to hang over the country. Earlier Wednesday, French power-grid operator Reseau de Transport d’Electricite said it may have to issue alerts this winter to ask households, business and local governments to reduce consumption.