What do suppliers offer, how to choose your contract... Five questions about the increase in electricity on February 1

Europe 1 with AFP 9:26 a.m., February 1, 2024

Starting this Thursday, your electricity bill will increase by just under 10%. At issue: the return of the domestic final electricity consumption tax (TICFE) and the gradual end of the tariff shield, put in place at the beginning of autumn 2021. 

The government wants to get out of the price shield: despite the drop in prices on the wholesale market, the French's electricity bill increases by just under 10% on average on February 1, with the return of a government tax which concerns all subscribers.

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Why this increase?

Bills will increase as the price of a megawatt hour (MWh) plummets on the markets. It is currently trading around 80 euros, certainly more than before the energy crisis when it cost 50 euros, but more than half as much as a year ago (190 euros), and very far from the peaks reached at the summer 2022 (1,000 euros).

So why this increase? It results from a decision by the government to gradually exit the tariff shield, which is very costly for public finances. To do this, it partially restores the domestic final electricity consumption tax (TICFE) which had been lowered to the minimum for the implementation of the tariff shield. It will increase in February, from 1 to 21 euros per megawatt hour, as the 2024 budget allowed. Before the crisis, it was 32.44 euros.

Without the increase in this excise, the bill would have had to fall on average by 0.35%, according to the energy regulation commission. The tax increase will bring in 6 billion euros to the State this year, but a complete return to normal could have brought in 9 billion.

Who pays what?

The increase in this tax should result in “an increase of 9% on average for everyone” on the bill, summarizes the Energy Mediator to AFP. "By acting on taxes, more particularly TICFE (...) it is indeed all electricity subscribers who will see their bill increase", reacted UFC-Que Choisir after Bercy's announcement on 21 January.

In other words, all subscribers, whether they are at the regulated rate at EDF or on market offers at EDF and its alternative supplier competitors, are affected by the increase in the tax, which is fixed. This even concerns consumers who had chosen the UFC-Que-Choisir offer negotiated with Octopus Energy to benefit from a 14% reduction on the regulated tariff.

The bill will increase by 8.6% for households subscribed to EDF's regulated "base" tariff and by 9.8% for subscribers to the "peak/off-peak" tariff. They represent nearly 20 million households. The increase will be 10.1% for some 400,000 households subscribing to the "peak day reduction" or "temporary" tariff which allows them to benefit from advantageous rates in return for flexible consumption.

According to the examples communicated by Bercy, for a four-room house heated with electricity (9 MWh/year), the bill would increase by 17.80 euros per month. A one-room apartment not heated by electricity would see its average monthly electricity bill increase by 4.50 euros.

What do suppliers offer?

The increase in the "excise on electricity" relaunches the battle for purchasing power among alternative suppliers, who are starting to make tempting offers again since prices began to calm down in the second half of 2023. "Those who have a market offer still benefit from the drop in market prices", with taxation only erasing part of this gain, indicated Emmanuel Fages, energy analyst at Roland Berger.

“There are many more offers and offers which are cheaper than the regulated tariff, sometimes up to -20%,” notes the National Energy Mediator. Example at TotalEnergies which offers a fixed price offer over 1 year with a kWh on average 17% cheaper than the regulated rate. Octopus Energy has committed to covering 50% of the tax increase for six months.

How to choose your contract carefully?

The Energy Mediator offers an online offer comparator and reminds us that you can leave your supplier at any time and free of charge for another, but he warns against the temptation of overly tempting proposals. The price must be offered in KWh and not in monthly payments, because these can be undervalued, underlines the energy mediator.

New increases expected?

Including the previous increases (4% in February 2022, 15% in February 2023, 10% in August 2023) and that of February 1, the average total increase over two years reaches 43 to 44%. The next one will take place on February 1, 2025, with the total restoration of the tax to its maximum level, according to Bercy. This will then sign the end of the tariff shield.