End of the tariff shield: a gas tax almost doubled on 1 January

Europe 1 with AFP 18:03 p.m., December 30, 2023

The standard excise duty on natural gas for fuel use, which replaced the domestic consumption tax on natural gas since 2022, will rise to €16.37 per megawatt hour (MWh) from January 1, from €8.45 currently, according to a decree published on Saturday in the Official Journal. This rate corresponds to the ceiling authorised by the 2024 Finance Act, published on the same day in the Official Journal.

By comparison, the benchmark price of natural gas on the European market was around €32/MWh on Friday, after well above €100 in 2022, with peaks of more than €300.

€1.9 billion in savings for the State

"For half of the gas subscribers who have opted for a fixed-price tariff offer, the increase in excise duty will lead to an increase in the gas bill of around 8 euros per megawatt hour," Nicolas Goldberg, an energy analyst at Colombus Consulting, told AFP.

Since individual bills are often in kWh, this equates to an increase of 0.8 cents per kWh. Many current fixed offers are offered by suppliers at just over €0.100 incl. VAT, or 10 cents, per kWh. The other half of the subscribers have signed offers based on an index, known as the "sales benchmark" established each month by the Energy Regulatory Commission.

The Ministry of the Economy estimates that this index could fall from 123 euros/MWh in December for consumption related to cooking or hot water in the low range, to an average of 114 euros over the first three months of the year, according to market expectations to date.

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The consumer would therefore not benefit from the drop in prices, since the tax would keep the gas bill around the price paid in December. The current price is at the same level as when the tariff shield was lifted on July 1, 2023.

Economy Minister Bruno Le Maire said in September that the tax hike would have "no impact on consumers". The increase in excise duty is expected to generate savings of €1.9 billion for the State.

Several hikes for gas

For several months now, the executive has been organising the gradual exit from the tariff shield, which has been deployed since the end of 2021 to moderate the impact of soaring gas and electricity prices. Since 1 July, there are no longer regulated gas tariffs (TRVG), which allowed the government to directly limit the increase in tariffs. Instead, a "benchmark" price from the Energy Regulatory Commission, updated every month, should serve as a guide, based on market prices. It serves as the basis for the "gateway" tariff offers.

Another increase for gas is also on the horizon, which will also be reflected in bills: the gas distribution tariff, which accounts for about a quarter of the final bill, will increase on 1 July 2024; the Energy Regulatory Commission must determine how much, by the beginning of January.

Nothing to report on the electricity side

With regard to electricity, no new tax increases have been published in the Official Journal. The government could raise the regulated rate in February, but has committed to reducing the rate by less than 10% compared to August 2023.

"Many experts, including myself, believe that raising the excise duty on electricity would be a big mistake at a time when people are being encouraged to electrify their uses for heating or vehicles," Goldberg added.

The domestic tax on the final consumption of electricity is currently at €1 per MWh. Before the crisis, it was 22.5 euros. "It would be a mistake to raise it to the previous level, because for the past two years, in 2022 and 2023, electricity tariffs have increased by an average of 30% in France, which is unprecedented. The message sent by the government would be catastrophic," Goldberg said.