French electricity bills to drop by 14% after U-turn on tax

Electricity prices will drop by more than initially expected next year, as a planned tax increase on consumption has been removed from the 2025 budget. 

Bills will drop by around 14% for millions of households next year – more than the 9% initially expected if the tax had remained in place – said prime minister Michel Barnier in an interview with Le Figaro.

Businesses will also save “several hundred million euros” as a result of this, Mr Barnier told a meeting of small and medium businesses owners in Paris following the announcement. 

The backtrack comes amid widespread political pressure, with the increase in tax on electricity one of the ‘red lines’ that the far-right Rassemblement National says prevents it from supporting the proposed 2025 budget. 

The party, though, says other changes are needed to the budget for it to vote in favour at next week’s sessions in the Assemblée nationale.

Failure for the government to pass the 2025 budget (both the finance and social security bills) via a traditional vote will result in it having to use the controversial mechanism known as ‘article 49.3’ to force the bill through. 

This would leave the government open to a vote of no confidence, with indicators pointing towards the left and far-right uniting on such a measure and toppling Mr Barnier and his cabinet. 

Read more: Why and when is the French prime minister at risk of losing his job?

Mr Barnier said that both government members and opposition politicians alongside Marine Le Pen had asked for the electricity tax rise to be removed from the budget. 

This includes the right-wing majority Senate, with the chamber voting against the section of the bill relating to the tax increase. 

Why are electricity prices dropping?

A global drop in electricity prices (following a sharp rise in 2022 due to the start of the war in Ukraine) has been underway for a number of months and is set to continue into 2025. 

At the same time, France’s nuclear capacity is returning to peak levels after several reactors undergoing maintenance in recent years have come back online.

Read more: Cars, energy, homes: what do France’s new climate targets change 

The advent of this cheaper supply and overall surplus will naturally reduce the price of electricity for consumers on an EDF regulated tariff (tarif bleu) by around 14%, as Mr Barnier has confirmed.

It is likely that those on unregulated tariffs would also see prices drop as the market reacts to lower prices offered on regulated bills. 

As a result of the lower prices, Mr Barnier’s new government announced an increase to the Taxe intérieure de consommation finale sur l’électricité (TICFE), a tax on electricity consumption.

This tax was suspended in 2022 as part of measures to protect households against energy cost spikes, but was reinstated earlier in 2024.

The government argued an increase in the tax was a natural progression to what the levy would have become through standard increases if it had not been suspended in 2022.

It also argued that electricity prices would still drop for households despite the increase, but they would not drop by the expected 14% and instead see bills be around 9% cheaper.

An increase of the TICFE would reportedly bring in around €3.4 billion next year, a significant amount amongst the €60 billion the government seeks to find in the 2025 budget. 

Read more: Extra fees start soon for French homes without Linky smart electricity meter

Far-right claim victory on tax U-turn

Leader of the far-right party Jordan Bardella called the U-turn a victory for the RN. 

The government hopes that its flexibility on the TICFE tax will help the budget pass a parliamentary vote. 

“When the government says that a text can be improved and that we are listening to Parliament, that is the case and so we are making the text evolve,” Laurent Saint-Martin, Minister of Public Accounts told the Assemblée nationale. 

The far-right have other ‘red lines’ before they will vote in favour of the budget.

These include no reduction in the reimbursement of medicines, but a reduction to state the Aide médicale d’Etat scheme (a free healthcare provision for undocumented migrants with low incomes).

A reduction to the latter was also announced by Mr Barnier in his interview with Le Figaro. 

“We are not going to abolish it, but the basket of care covered will be significantly reduced… we are going to undertake a reform to prevent abuse and misappropriation,” he said.

Further changes may be included in a future immigration law.

Read more: What changes are proposed in the planned new French immigration law? 

A further red line that may be more difficult to bypass is the delay in pension rises. 

The 2025 budget includes a delay in pension indexing to July 2025 as opposed to in January, when it usually takes place. 

This would avoid pensions being indexed to high inflation levels from the preceding years, which would see them rise significantly more than if delayed until in July, and save the government around €3.6 billion.

The outcome would see around 15 million pensioners lose out on €15 per month between January and July. The RN has said it finds this ‘unacceptable’. 

Read more: Off peak hours, Linky meters: electricity and gas bills are set to change in France