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ORIGINAL FRENCH ARTICLE: Nouvelle flambée du prix du gaz

by Pierre-Henri Lab

Natural Gas Prices to Rise Again

Translated Wednesday 19 December 2007, by Gene Zbikowski

Purchasing power. The government will probably allow the national gas company to hike its rates.

The French government is getting ready to throw salt on the open wound of French purchasing power. When questioned regarding the revelations in the newspaper Les Echos indicating that the management of the national gas company, Gaz de France (GDF), was going to request an increase in its regulated rates, both for private and corporate customers, in the near future, the president of the French National Assembly, Bernard Accoyer, said “a hike is probably because the skyrocketing price of natural gas is forcing GDF to avoid entering into a situation in which the company’s books would no longer be balanced.” Aware of the unpopularity of such a measure at a time when the question of purchasing power figures is the population’s number one concern, Accoyer stated that “the government will negotiate the lowest possible hike with GDF as concerns private customers.”

10% for corporate customers

These words are not likely to blunt the criticism of those who contest the necessity of a new hike in gas prices. To justify the increase, which will probably be between 5 and 6% for private customers and 10% for corporate customers, GDF argues that it must pay more for the natural gas that it supplies to its customers due to the increase in the price of crude oil, which, according to les Echos amounts to 950 million euros in increased costs.

The CGT-énergie trade union replies that this argument is over-simplified, adding that “only the variation in real long-term purchasing costs should be reflected in rate increases and decreases” and that “Gaz de France’s import costs fell by 10% between 2006 and 2007 (over the first nine months of the year).” CGT-énergie, the biggest of the gas workers trade unions, says that the hike requested by GDF is more about “the impact on the price of GDF shares if present gas rates are maintained.” In other words, the government fears a fall in the price of GDF shares because this could endanger a merger with the Suez company or lead to new demands from GDF shareholders. In any case, it is certain that GDF, chaired by Gérard Mestrallet, is financially sound. As the CGT trade union pointed out, “its results show strong growth. Turnover went from 1.15 billion euros in 2004 to 1.75 billion in 2005 and 2.6 billion in 2006.” The dividends paid to shareholders also increased, from 420 million euros in 2004 to 1.1 billion in 2006. The CGT trade union also pointed out that GDF announced in a joint communiqué with Suez on October 15, 2007, that dividends would increase by 50% over three years, and argued that the rate increase is “the only means to keep the promises that have been made to shareholders.”

Alain Bocquet, the spokesman for the communist deputies in the French National Assembly, wrote to Prime Minister François Fillon to “plead in favor of a refusal to hike gas prices on January 1, 2008.” Boquet, who represents the French département Nord in the National Assembly, argued that “a hike in the natural gas rates charged to private customers would increase their financial problems and would only be one more piece of evidence showing that the government authorities are openly indifferent to their expectations” and would signal “an intent to reassure Stock Exchange circles at a time when rumors of a speedy merger of Gaz de France and Suez are being confirmed.”

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