The natural gas market in France: a liberalized market

Stages in liberalizing France’s gas market

The member states of the European Union have been committed to liberalizing their energy markets – opening them up to competition – since 1998, when the EU set about creating a large-scale European market in natural gas and adopted Directive 98/30 (22 June 1998). This was followed by Directive 2003/55 (26 June 2003) laying down the arrangements for the “internal market‘ in natural gas.
Those European Directives were turned Into French law by two Acts, Law n° 2003-8 (3 January 2003) and Law n° 2004-803 (9 August 2004). These Acts were subsequently amended by Law n° 2006-1537 (7 December 2006).

France opted for gradual, controlled liberalization: the group of what were known as “eligible‘ customers - those able to change supplier as they wish and choose products at uncontrolled prices - was extended stage by stage:

  • August 2000: premises consuming more than 237 GWh/year were opened to competition: 600 sites, or 20% of the market;
  • August 2003: 37% of the market liberalized, as 1200 sites consuming over 83 GWh/year were permitted to choose their supplier;
  • July 2004: all small businesses now allowed to get gas from the supplier of their choice, another 640,000 premises (70% of the market liberalized);
  • July 2007: total liberalization of the market, as over 11m domestic customers became able to choose their supplier of natural gas.

 

The liberalization of the natural gas market in Europe applies to both production (gas extraction) and supply. The running of gas transport and distribution facilities remains in public hands, with no competition. All natural gas suppliers are entitled to use these facilities under terms which are objectively defined, transparent and non-discriminatory.

Energy market liberalization in practice

Since 1946 Gaz de France had been supplying gas to 95% of mainland France, the remaining 5% being supplied by Local Gas Distributors (ELDs), each of which also had a monopoly in its area.

The organizations involved
The first stage in liberalizing the market came in 2006 when the two historic suppliers (GDF and EDF) changed status from public enterprises to separate public corporations, each of which was then split up into three subsidiary divisions: one for marketing (the business opened up to competition) and two others for running the distribution grids (obliged to treat all suppliers alike).
The distribution management portion is still the subject of co-operation agreements between the two organizations traditionally involved, for meter readings and other purposes.
Liberalization of natural gas supply means that consumers can now choose from a number of gas suppliers, including the new, so-called “alternative‘ suppliers such as Eni.
Each prospective supplier must first, however, obtain a Department of Industry permit, which is only issued on proof of the firm’s financial soundness and real long-term gas procurement capability.
Eni holds all the necessary permits for each market: small businesses, public sector and domestic consumers (households).

The consumer’s options
The regulated tariffs set by the public authorities are only available from the historic supplier. The alternative suppliers (including EDF so far as the sale of gas is concerned, and GDF for the sale of electricity) apply prices chosen at their discretion, known as “market price products‘, taking market conditions and their own operating costs into account. The historic suppliers may also offer freely-priced products in addition to their regulated-tariff ones.

When a consumer moves into new premises he/she may choose between a regulated-tariff product and a market-price product. The contract signed by the previous occupant is immaterial.

Changing supplier is a simple process: the customer contacts his/her chosen new supplier to agree a changeover date. It is the new supplier’s job to notify the old supplier. No physical change or intervention is needed. The minimum changeover time is 13 days from approval of the change request, plus the statutory seven-day “cooling-off period‘.

While awareness that the electricity and gas markets have been liberalized is greater among small businesses than among households, by no means all have grasped how to set about changing supplier in practice, as shown in surveys of these two groups (households and small businesses) conducted by LH2 on behalf of the public Energy-Info Unit. In 2009, two years after the liberalization of electricity and natural gas markets had been extended to households, only 36% of such consumers had realized that they were entitled to change energy suppliers.

Contacts

Gas for households

contacts

Contact a natural gas advisor

  • Tel. 3294
  • From Monday to Friday 9am - 7pm
    Free toll number from a fixed-line

Last updated on 26/02/13