EU Widens Probe into French Tariff Regime

Brussels on Tuesday stepped up pressure on France over regulated electricity tariffs, announcing that it was widening an investigation into whether some larger companies were benefitting from artificially low charges that could constitute illegal state aid.

Two years ago, the European Commission opened a probe into the "regulated tariff" regime, under which power prices that can be charged are effectively capped – helping companies in energy-intensive industries, in particular.

But in August last year, France extended the system until June 2010 and opened it up to new beneficiares. It is these extended arrangements which are now being wrapped into the commission inquiry, which is ongoing.

Brussels said on Tuesday that it was "concerned by the distortion of competition arising from a system of tariffs that are set without relation to market mechanisms and that give an advantage to large companies operating in markets open to European competition".

"The commission fears that the system of 'return tariffs' gives an unfair advantage to certain large companies over their competitors. Prolonging and extending the system could exacerbate these effects and hinder the development of competition in the French electricity market," said Neelie Kroes, EU competition commissioner.

Brussels has instigated a series of antitrust actions against countries where it feels energy liberalisation is being held back – with some positive results. However, French president Nicolas Sarkozy has, in the past, been emphatic that he would not allow the competitiveness of French business to be adversely affected by power market liberalisation, a sentiment that is likely to be enforced by current economic conditions.