French Prime Minister Michel Barnier announced a 14% reduction in electricity prices for 80% of citizens on regulated tariffs, exceeding the previously promised 9% decrease. Despite assurances of no tax hikes in the 2025 finance bill, the TICFE tax on electricity consumption will rise to around 30 euros per megawatt-hour. Additionally, VAT on subscriptions will increase from 5.5% to 20%. Ongoing discussions may affect these plans, including a possible gas tax increase.
The Government’s Shift on Electricity Prices
The French government has made a significant decision to adjust its approach to electricity pricing amid growing dissent from senators and deputies, as well as the looming threat of a motion of censure from the National Rally. In a recent interview with the *Figaro*, Prime Minister Michel Barnier revealed that electricity prices are set to drop by 14% in February for approximately 80% of French citizens who subscribe to regulated tariffs or offers linked to these tariffs. This reduction exceeds the initial 9% decrease announced during the finance bill presentation.
Tax Increases and the TICFE Adjustment
While Prime Minister Barnier assured that there would be no rise in electricity taxes in the upcoming 2025 finance bill, this statement requires clarification. The TICFE, a domestic tax on final electricity consumption, will indeed see an increase, albeit smaller than previously anticipated. His team confirmed that the TICFE will revert to its pre-energy crisis level of around 30 euros per megawatt-hour, specifically 29.98 euros as per Matignon.
Initially set at one euro to mitigate the energy price surge during the crisis, the TICFE had been raised to 21 euros per MWh at the start of the year. Barnier’s associates clarified that they are adhering to the legal framework without further intervention, effectively returning to the rate prior to the tariff shield. Observers noted that while the government views this as a return to normalcy, it still constitutes a tax increase compared to last year’s rates. Had the government kept the TICFE at 21 euros per MWh, February bills could have decreased by 19%.
Additionally, the government plans to maintain the scheduled rise in the fixed part of VAT on subscriptions, increasing it from 5.5% to 20% in February. This adjustment was justified during the budget presentation as a requirement of European regulations, which mandate a uniform VAT rate for both fixed and variable components. However, alternatives were available, such as keeping the fixed VAT rate at 5.5%—a provision not challenged in Europe—or standardizing all VAT at 5.5%, which could have significantly lowered bills.
Despite budgetary constraints, the VAT and TICFE increases are expected to generate revenue, with the original finance bill projecting an influx of three billion euros. While Barnier’s recent decision will reduce this figure, the exact impact remains undetermined. This shortfall might be offset if the senators proceed with a gas tax increase, projected to yield one billion euros, although the government is not inclined to engage further in the upper house debates.
Moreover, the anticipated 14% reduction in bills could still be subject to change, as the Energy Regulatory Commission is currently exploring the possibility of implementing an increase in TURPE, the network usage tariff, as early as February instead of the planned summer 2025 schedule. This matter is still under consideration.
Electricity pricing has dominated discussions in recent days, with the National Rally threatening a motion of censure. In his interview with the *Figaro*, Barnier explained his change in stance, stating that both members of his majority and opposition leaders have urged him to adapt to the evolving situation.