December 11, 2013 / 4:57 PM / 6 years ago

UPDATE 2-France to limit EDF utility tariff hikes in 2015-18

* EDF shares down 2 pct on tariff news

* 2013 and 2014 increases 5 pct, from 2015 only 2-3 pct

* Energy-intensive industries may get better prices (Adds detail on Energy-intensive industries)

By Benjamin Mallet

PARIS, Dec 11 (Reuters) - France aims to limit state-controlled utility EDF’s regulated electricity tariff increases to 2-3 percent or less per year in 2015-18, a presidential palace official said on Wednesday.

Power prices have become a hot political issue across Europe as subsidies for renewable energy have inflated electricity bills, sparking protest from consumers grappling with shrinking purchasing power.

“The tariff increase will be between two and three percent, and even less for certain periods, beyond the increase for 2014 that has already been decided,” the official told Reuters after a cabinet meeting about power prices.

“The exact level of the increase will depend on finding a balance between the financial situation of EDF - whether the company is able to cope with a lower power price - and household purchasing power,” he added.

In July, the government announced the biggest increase in power prices in at least a decade to cover rising costs at EDF, allowing the company to increase tariffs by 5 percent in August 2013 and a further 5 percent in August 2014.

EDF shares, which rose more than 50 percent in the months following the July announcement, fell on Wednesday. They were down 1.6 percent in thin trade, reversing slight morning gains and trailing a CAC 40 index was up 0.7 percent.

Regulator CRE said in June that the average electricity bill for households had to rise as much as 30 percent by 2017 to close a gap estimated at 1.47 billion euros last year between regulated tariffs and EDF’s costs. The energy ombudsman had recommended five percent increases in 2013, 2014 and 2015.

The government - which must balance the need to cover EDF’s costs with the need to keep down power prices to protect citizens’ purchasing power - is under pressure from EDF’s private competitors, who argue that the artificially low tariffs distort competition.

In the past decade, successive governments have limited annual increases to two-to-three percent.

Exane BNP Paribas has estimated that with 40-45 percent of EDF’s core earnings coming from French power sales, every one percent tariff increase boosts core earnings by 200 million euros.

The regulated tariffs do not include taxes, notably the CSPE renewables tax, which is set to increase by 3 euros per megawatt-hour from January 1, 2014, which will increase power bills by about 2.4 percent on average.

The Elysee palace official also told Reuters that the government is considering offering better support to power-intensive industries, which struggle to compete with companies in the US, where power prices are half as high.

He said the state will ask EDF to review its 2010 contract with the Exeltium consortium of energy-intensive industries, which includes chemical firms Arkema and Solvay , steel maker ArcelorMittal, and industrial gas group Air Liquide. (Additional reporting by Julien Ponthus; Writing by Geert De Clercq; Editing by Jason Neely/Jeremy Gaunt)

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