Gas and electricity suppliers increase their prices, challenging the Belgian Government, which had frozen rates

Context and Summary

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The question of freezing of price of the gas for domestic customers has given a "contest of strength," in France, since as a first step, the Commission de Régulation de l’Energie (French Energy Regulator) issued an unfavourable opinion the September 29, 2011 to the government project of rate freeze, advisory opinion which the French Government has not taken into account; but the Conseil d’Etat (Council of State) by its judgment of November 28, 2011 annulled the Ministerial Order on the freeze rates for illegality, the administrative judge is ready to lend a hand to the regulator.

A similar "contest of strength," is taking place in Belgium. The protagonists are of the same type, but the judge is not to the part. This time, it is an Act, passed on March 29, 2012, which freezes the indexing settings that allow the evolution of prices in contracts for long term energy supply contracts. Belgian Parliament acts therefore like the French Government, that is to say using its normative power to protect the consumer by not exposing it to the market power of suppliers, who may use their position on the basis of insufficient opening the market to competition. But we know that this reasoning can have perverse effects because only these historical operators can practice these prices which may suggest that they become below costs.

Doubtless encouraged by the French example, we measured here that Comparative Law is a practical art, three Belgian energy suppliers increase their prices. Without anticipating about the end of the story, it will simply highlight the difference of the two other stakeholders strategy. The Minister does not challenge the suppliers before a court, even when they break the law. Perhaps this is due to his own question about the compliance of the Belgian Act of March 29, 2012, to European law, a rate freeze could be considered as contrary to the Competition law. He prefers to "delegate", by "incitement" by suggesting to consumers to challenge their invoices. A caustic spirit will see a kind of "civilization of the Competition law".

The regulator is more rhetorical way (click here to read an article about this). It opens an Internet chat ( mettre le lien du chat reçu par mail). The spokesman of the regulatory authority begins by noting that the powers of the regulator in regard to consumer price-fixing are very reduced and he asks for years a strengthening of its powers in the matter. This is a good way to show that if it had it, the situation would be more equitable. Responding to a web visitor, reporting on a change of supplier, the regulator congratulate and showed him that the savings illustrates the positive nature of liberalization. We have here a fairly similar reasoning to the Commission de Régulation de l’Energie (French Energy Regulator) and the Conseil d’Etat (Council of State) in France.

The regulator expressed his opinion on the way in which suppliers develop their calculation of indexation and considers that indexing on the price of gas in the stock market is a good reference because it is not artificial, while the customer could be exposed to indexation on the price of oil, which is both more violent, more strong and artificial, since the product is different. It is here that the regulator is benefiting from the informal character of an Internet chat at the same time, as the French regulator, estimates that some mobility of prices by operators is more consistent with the competitive model and in this more in the spirit of liberalization, the moment that prices remain fair in relation to what he refers to as the "actual costs of suppliers".We see here that the Belgian contest of strength is quite close to French one but it is not known who will be the winner, at the moment that, the key character who is the judge is still behind the curtain. It just think that the rate freeze by the use of the normative powers cannot withstand the higher will to create a competitive market, from the moment that prices remain correlated to the costs and it is therefore the same couple that are between the two countries, namely between the regulator and the judge.

Brief commentary

The Belgian Act of March 29, 2012 has decided to freeze indexing parameters, described in the gas and electricity contracts. Electrabel, Luminus, and Essent have yet decided to immediately increase the indexing, producing an increase of price of 4 %. A Minister encourages consumers to contest their invoice in court. The spokesman of the Commission de Regulation de l’Electricité et du Gaz (CREG – Belgian Regulatory Commission for Electricity and Gas) opens an Internet chat . Is that a French scenario is it in perspective?