Senate recommends tax reform of electricity prices

The French Senate recently published a report advocating a targeted VAT cut on electricity to reduce household bills. The Senate’s electricity inquiry committee recommends reducing the VAT rate from 20% to 5.5% on “basic consumption” by households, defined by a certain amount of consumption, and maintaining a rate of 20% above that threshold. The measure aims to make the cut more equitable and financially viable for the state.
The aim is to cut electricity bills in France by more than 40% for basic consumption. This initiative, combined with the introduction of nuclear contracts with EDF, could result in significant savings for consumers. The report states that the measure would cost €3.5 billion per year, compared with €12 billion for a general VAT cut.

Impact on households and businesses

For a household in an electrically heated apartment consuming 6 MWh per year, the VAT reduction could translate into annual savings of around €600. Small retailers such as bakers could also benefit from significant reductions in their energy bills.
The Senate report also proposes contracts for difference (CFDs) with EDF, guaranteeing a fixed price for existing nuclear power of between €60 and €65 per MWh. These contracts would protect both producers and consumers from market price fluctuations.

Electricity production forecasts

The Senate committee also examines the prospects for electricity generation in France, predicting a 38% increase in demand by 2035, reaching 700 TWh in 2050. To meet this growing demand, the report recommends the optimised expansion of existing nuclear power plants and the judicious development of renewable energy sources.
The report warns, however, of the high costs of integrating renewables into the energy mix, due to the investment required in the grid. It also highlights the risk that natural uranium will become increasingly scarce, and calls for further research into fast neutron reactors to recycle nuclear waste.
The Senate emphasizes the need for long-term energy planning for France to secure energy supplies and stabilize costs for consumers. This programming should include the expansion of existing nuclear power plants, the construction of new reactors and a cautious increase in renewable capacity.