Key Benefits:
Participated in the session: Mr. Philippe de Ladoucette, President, Mr. Maurice Meda, Vice-President, Mr. Hugues Hourdin, Bruno Lechevin, Pascal Lorot and Emmanuel Rodriguez, curators.
On February 11, 2008, the Energy Regulatory Commission was seized by the Minister of State, Minister of Ecology, Energy, Sustainable Development and Land Management, and by the Minister of Economy, Industry and Employment of a draft decree on the provision of natural gas at the special rate of solidarity, as provided for in section 7 of the Act of January 3, 2003, as amended by Act of 7 December 2006.
To develop its opinion, the CRE consulted the gas suppliers of specific customers, concerned with this solidarity tariff, or their representatives, and consumer associations participating in the consumer working group (TCG). A round table was held on 27 March 2008.
1. The contents of the draft decree
1.1. The special rate of solidarity
The benefit of the special rate of solidarity (TSS) for natural gas is open, for their main residence and at their request, to residential customers who are entitled (1) to the special "first-necessary" pricing in electricity.
This tariff is applicable to consumers with a gas supply contract, and to those residing in a residential building heated by a collective gas boiler. It must be applied by all natural gas suppliers.
The solidarity rate is applied in the form of an annual lump-sum reduction depending on the number of people in the home, as well as its consumption in the case of a gas supply contract. In this case, the reduction is applied, on the invoice, to the price of contractually established supply between the customer and its supplier and "must not cover the entire consumption". For a customer in collective heating, the discount is paid directly by cheque.
Consumers who have a natural gas supply contract to which the special solidarity rate is applied are free of charge from the commissioning and registration of their contract, and an 80% discount on the billing of a trip due to an interruption in supply due to a default of settlement.
Consumers who hold a natural gas supply contract
| 1 UC (**) | 15 | 45 | 65 |
| 1 < UC < 2 | 20 | 60 | 85 |
| 2 UC or + | 25 | 75 | 105 |
| (*) The draft decree does not specify whether the reduction is HT or included. (**) 1st person = 1 UC; 2nd person = 0.5 UC; 3rd person and following = 0.3 UC. | |||
Consumers residing in a building heated by a collective gas boiler
| 1 UC (**) | 50 | ||
| 1 < UC < 2 | 65 | ||
| 2 UC or + | 80 | ||
| (*) The draft decree does not specify whether the reduction is HT or included. (**) 1st person = 1 UC; 2nd person = 0.5 UC; 3rd person and following = 0.3 UC. | |||
1.2. Tariff allocation procedure
The persons entitled to the solidarity rate are identified by the health insurance organizations, which regularly transmit the list to a body designated by the gas suppliers and acting on their behalf or, where applicable, to the gas suppliers. This list specifies the composition of each home.
The agency designated by the suppliers, or the supplier himself, sends an annual certificate to the eligible holders asking them to mention the reference of their gas supply contract. Gas owners must request this information and the name of the gas supplier to their owner or agent.
Once returned, the attestation allows access for one year to the special rate of solidarity.
2. REC observations and recommendations
2.1. entitled
The draft decree provides that the solidarity rate is applicable to consumers with a gas supply contract and to those "resident in a collectively heated residential building with natural gas".
In the case of a collective heating system, the mechanism provides that the person entitled to transmit the certificate to the owner, or, where applicable, to his agent, to complete the elements relating to the contract for the supply of natural gas of the collective boiler.
First, it seems that the draft decree, by the mechanism it provides, does not apply to buildings collectively heated by a heat network whose steam would have been produced by a gas boiler.
The CRE recommends that the decree clarify more clearly whether consumers residing in a building heated by a heat network can or cannot benefit from the solidarity rate.
In addition, the CRE recommends that the decree provide that housing owners can benefit from the solidarity rate, indicating that the attestation must be forwarded to the trustee of their building to complete it.
2.2. Principle of application of lump-sum reductions
The draft decree provides for the application of the solidarity rate in the form of an annual lump-sum reduction, which is a simplification in relation to the existing electricity system, based on a reduction applied to the selling rate for part of the annual consumption.
However, the mechanism to allocate reductions is heavy. It involves health insurance organizations, suppliers, a centralizing agency on behalf of suppliers who wish to do so, as well as owners, their agent, and building trustees in the case of collective heating. The resulting management costs are estimated at approximately €6 million, or €8 per beneficiary, to compare to the reductions of only €15 to €25 allocated to customers using gas for the kitchen.
In addition, the heaviness of approaches in the case of collective heating may discourage persons entitled to continue their application until its completion.
The CRE advocates the establishment of a simpler and less costly device, which would assign jurisdiction to a single agency to send cheques covering the lump-sum reduction and the reimbursement of commission and travel, upon presentation of the completed certificate, to which would be attached documents proving the use of the gas, and proof of payment by the recipient.
Such a device would be based on the following provisions.
In the case of a consumer holding a gas supply contract:
― consumption slices defining lump sum discounts should be determined with reference to the annual reference consumption (CAR) on natural gas bills, as provided for in the July 2, 2007 decision on electricity or natural gas supply invoices, effective May 18, 2008. The applicant for the solidarity rate would include this CAR on the attestation that it would send to the common body;
― the total planned reduction should be paid to the recipient, even if it moves before the end of the year of benefit of the solidarity rate. This is also what is expected in the case of collective heating, where the common body sends a cheque corresponding to the total of the reduction provided to the recipient, that the recipient moves or not in the year in which he/she benefits from the TSS.
In the case of a collective heating, the lump-sum reduction should not be reduced if the collective heating system is powered by several sources of energy (which the common body does not have).
2.3. Amount of lump-sum reductions
2.3.1. Impact on average invoice
In the case of a customer holding a gas supply contract, the draft decree provides that the lump sum discount is applied on its invoice.
If the device recommended by the REB in 2.2 is not retained, the REB recommends that the Order explicitly specify that the lump sum discount is included and applies to the invoice included.
The reduction of the tax average invoice of a residential customer at regulated rates at Gaz de France is given in the following table as information:
| 1 UC | 18.9% | 19.4% | 7.3% |
| 1 < UC < 2 | 25.2% | 25.9 per cent | 9.5% |
| 2 UC or + | 31.5 per cent | 32.3 per cent | 11.9% |
| (*) Discount calculated on the basis of the average consumption of B1 (heating). | |||
2.3.2. Impact on the gas market
The lump-sum reductions applied to gas consumers will result in revenue losses for gas suppliers applying the solidarity rate. According to the Act of January 3, 2003, these revenue losses and management costs related to the implementation of this tariff will be compensated to suppliers. Compensation will be provided by contributions from natural gas suppliers, prorated by the amount of gas sold by these suppliers to end consumers.
Each gas supplier in France will therefore support a charge equal to the contribution it will pay to compensate for TSS charges. It will distribute this burden on its final consumers, according to the trade policy that it will define, through gas prices it applies, whether they are regulated or not.
As well as suppliers' contributions are calculated on a pro-rated basis, the CRE recommends that the price increase generated be applied in the form of an identical amount in €/MWh for all customers, whether on a market offer or on regulated rates, in order to avoid distributions of the discriminatory contribution between customers. This amount should be included on the gas bill, whether the contract is individual or collective. The July 2, 2007 invoice order should be amended accordingly.
In addition, the values of flat-rate reductions, which will determine the contribution due by suppliers and will affect consumers, must be defined so as not to create a competitive disadvantage of natural gas compared to other heating energies.
The proposed reductions are expected to result in TSS charges of between €40 and €50 million (2), estimated from an estimate of 755 000 consumers entitled to the TSS, of which 215 000 are collectively heated to gas (an average annual reduction of the order of €53 to €66 per beneficiary). The resulting unit contribution for natural gas suppliers will be around €0.10/MWh, which should not generate a major competitive disadvantage of natural gas compared to other energies.
2.3.3. Reduction for the "collective kitchen" package
There are flat offers "collective kitchen".
The CRE recommends that the decree prescribe the case of the "collective kitchen" package and affect it a flat reduction equal to that enjoyed by a consumer with a gas supply contract for cooking.
2.3.4. Evolution of flat-rate reductions
The draft decree provides that the sums of the lump sum reductions "can be adapted by order". The decree must make the adaptation of lump-sum reductions mandatory.
The CRE recommends that the reference "can be adapted" be replaced by "are adapted".
2.4. Application of lump-sum reductions
2.4.1. Definition of reduction brackets
In the case of a consumer holding a gas supply contract, the lump sum reductions depend on the customer's annual consumption. As a result, the amount of the reduction can only be defined as a posteriori, at the end of the year of benefit of the solidarity rate. This mechanism will pose counting problems, which will also be a source of litigation, given the threshold effects of a system of consumption brackets.
As a result, if the device recommended by the CRE in 2.2 is not retained, the CRE recommends that the consumption ranges in reference to the annual reference consumption be defined in the appendix to the decree. The consumer must specify in his certificate his CAR, that he will find on his gas bill.
This method will also enable suppliers to define a priori the reduction applicable to a consumer. This will allow it to benefit from a breakdown of the reduction according to its payment period, without having to make regularizations once the consumption is found ― assuming it can be ― and therefore the applicable reduction determined.
2.4.2. Reduced in case of moving
The draft decree does not specify how the reduction is calculated in the event of the relocation of the beneficiary before a year of benefit of the solidarity rate.
However, the mechanism for collective heating (the sending of cheques by the common body to the recipient) does not allow, in the event of a relocation of the recipient, to pay a reduction in the amount of time spent at the solidarity rate.
Therefore, if the scheme recommended by the ERC in 2.2 is not retained, the ERC recommends that, in order not to act differently according to the beneficiaries, the decree plan to pay the lump sum reduction in all cases.
2.4.3. Cumulative reductions
A consumer who is collectively gas-heated and has a natural gas supply contract for cooking must be able to benefit from a lump-sum reduction equal to that enjoyed by a consumer with a gas supply contract for heating and cooking. The proposed flat-rate reduction values respect this principle.
However, the REB recommends that the cumulative reductions can be specified in the Schedule to the Order. The certificate sent to the recipient should provide for this case.
2.4.4. Reduction cap
Article 2 of the draft decree provides that the lump-sum reduction "do not cover the entire consumption".
If the full payment of the one-year lump-sum reduction is not accepted, this provision must be specified. Do we understand that the reduction must be strictly less than the recipient's (TTC) invoice or the only part of the bill for the billing of the kilowatt hours consumed?
In the first case, the provision of the draft decree is always respected. In fact, the discounts are less than the HT invoice (a fortiori to the invoice included).
In the second case, for the low consumption of cooking and cooking water-heating uses of a fireplace of at least two people, the proposed reductions are higher than the amount charged kilowatt hours.
If the device recommended by the REB in 2.2 is not retained (full payment of the one-year lump-sum reduction), the REB recommends that the order specify that the lump-sum reduction must be strictly less than the recipient's invoice.
2.5. Procedure for the allocation of the solidarity rate
2.5.1. Centralization of the procedure by an organization
The draft decree provides that suppliers may designate an agency acting on their behalf, which will centralize the entire system.
If the system recommended by the REB in 2.2 is not retained, the REB recommends that the draft Order specify that all suppliers must appeal to the agency. To further increase the efficiency of the device and reduce the management costs, the choice of the same organization to manage the gas and electricity devices should probably be preferred. However, special attention should be paid to implement the gas system without disrupting the development of the electricity system and clearly identifying the management costs of the common body that must be allocated to each energy.
2.5.2. Privacy of recipient information
As several consumer associations have noted, the procedure for awarding the solidarity rate poses problems in the confidentiality of the information relating to the recipient.
On the one hand, in the case of a collective gas heating, the person entitled to the solidarity rate must apply to the owner (or his agent), or to the trustee of the building, the gas contract number and the name of the supplier. In doing so, he reveals his financial fragility.
The CRE notes that it would be highly desirable, in order to preserve the confidentiality of the information relating to the right-holder, that the building trustees systematically transmit the information relating to the contract for the supply of the collective boiler to the owner, and that the owner, if applicable, transfers them to the tenant, for example through the statement of charges and a mail in the event of a change of gas supplier.
On the other hand, the scheme proposed by the draft decree fears the creation of "black lists" of beneficiaries identified as having financial difficulties. The setting up of the ERC-advocated device would allow for a deviation of this risk.
3. REB Notice
The CRE advocates the establishment of a simpler and less costly arrangement than that provided for in the draft decree, which would assign jurisdiction to a single agency to send cheques to the beneficiaries of the solidarity rate, covering the lump-sum reduction and reimbursement of commission and travel, upon presentation of the completed certificate, to which documents proving the use of the gas, and proof of payment by the recipient.
This would require the implementation of the provisions described in 2.2.
Whether it is adopted or not, the REB recommends that the decree:
- requires that the management of the device be entrusted to a single agency;
― defines the consumption ranges of the Schedule to the Order in Council with reference to the annual reference consumption (CAR), which must appear on the gas bills as of May 18, 2008 pursuant to the Order of July 2, 2007 on the electricity or natural gas supply invoices;
― anticipates the full payment of the lump sum reduction in the case of a consumer holding a gas supply contract, even in the event of a move, in order not to act differently as the beneficiary has an individual contract or is collectively heated;
― indicates that owners of dwellings collectively heated to natural gas can benefit from the solidarity rate;
― indicates whether consumers living in a building heated by a heat network can or cannot benefit from the solidarity rate;
― anticipates the case of the "collective kitchen" package;
– makes it not only possible but mandatory to adapt the lump sum reductions by the ministers concerned;
― specifies, in its annex, that the cumulative reductions are possible in the case of a supply contract for collective heating and an individual supply contract.
If the system recommended by the CRE was not adopted, the CRE recommends that the decree specify that the lump-sum reduction applied for an individual contract is included. If the full payment of the lump-sum reduction was not accepted for individual contracts, as in the case of gas supply contracts for collective heating, the REB recommends that the decree specify that the lump-sum reduction must be strictly less than the recipient's invoice.
In addition, the CRE recommends that the future decree on compensation for public service charges related to the TSS require that the increase in the price of the gas resulting from the contribution due by gas suppliers be applied in the form of an identical amount in €/MWh for all customers, whether they receive a market offer or a regulated rate of sale. The July 2, 2007 order should be amended to require that this amount be included on the gas bills.
Finally, the CRE notes that it would be highly desirable, in order to preserve the confidentiality of the information relating to the right holder, that the building trustees systematically transmit the information relating to the contract for the supply of the collective boiler to the owner, and that the owner, if applicable, retransmits them to the tenant, for example through the statement of charges and a mail in the event of a change of gas supplier.
Done in Paris, March 27, 2008.
For the Energy Control Board:
The president,
P. de Ladoucette
