The retail market, the weak link in the electricity sector

Published on October 22 in La Tribune.

In the latest update to its “Retail Market Observatory” (September 30, 2026), the Energy Regulatory Commission (CRE), France’s regulator for the electricity and gas industries, provides an overview of average prices and market shares of retail sellers. This descriptive statistical analysis is very useful for economists—and perhaps for politicians as well. Above all, it shows that much remains to be done before the downstream electricity market becomes an efficient market.

Electricity suppliers and their customers

More than a century after the industrialization and commercialization of electricity, for most of us electricity remains a mysterious phenomenon of which we perceive only the end use: I press the button, lights turn on; I press it again, lights turn off. The complex machinery that makes this constant miracle possible is only mentioned during power outages, strikes, or price hikes. In our economies, the upstream sector of the electricity industry functions rather well. But as small consumers, we turn on our devices without giving much thought to the fact that, since electricity cannot be stored on a large scale and its consumption fluctuates greatly depending on the time of day, day of the week, and season, its production cost—and therefore its wholesale price—varies significantly. For example, on Thursday, October 8, 2026, the price per megawatt-hour was €0 at 1:30 p.m. and €253 at 7:30 p.m. We don’t seek to know the next day’s wholesale prices, even though this information is readily available on the eco2mix website. And even if we did know them, we wouldn’t want to (or couldn’t) adjust our consumption pattern to lower our bill. It is up to electricity retailers to supply us, often at a fixed price, with the electricity they generate or purchase at erratic prices. A market in which consumers who are unresponsive to cost fluctuations face retailers who are fully exposed to those fluctuations requires strict regulatory oversight.

Guidelines for Customer Information

Since July 1, 2007, all French electricity consumers, whether business or residential, have been free to sign a supply contract with about thirty companies operating nationwide, including traditional suppliers and so-called alternative suppliers, as well as some regional companies. Residential customers and small businesses may choose to remain on the regulated tariffs (TRVE), which are offered exclusively by incumbent suppliers, including EDF.

To help consumers choose a supplier, the CRE publishes the average prices charged by each one (Observatory, pages 36–43). In 2024, it also drafted Guidelines, a list of 13 measures guaranteeing consumers clear and comprehensive information throughout the duration of their energy contract (sign-up, execution, and termination). However, the companies in question must still comply with the guidelines. Inspections conducted by the CRE show that of the 19 national electricity suppliers to residential customers who have committed to following the guidelines, only 10 are fully compliant. For the other 9, compliance is rated as “advanced,” “intermediate,” or “limited.” In addition, the CRE has identified 12 suppliers that have not made such a commitment. There is therefore still room for improvement.

Prudential Rules for Suppliers

It is beneficial for consumers to be well-informed when choosing a supplier. However, as long as they do not adjust their consumption in response to fluctuations in wholesale prices, it is essential to ensure that their supplier does not take unreasonable risks in its procurement strategy. To this end, the CRE has enacted prudential rules designed to regulate suppliers’ procurement strategies and prevent their failure: hedging of volumes to be delivered, solvency and liquidity criteria, and internal reorganization to manage risks. In parallel with the CRE’s initiative, on June 13, 2024, the European Commission published Directive 2024/1711 (amending Directives 2018/2001 and 2019/944), “intended to improve the organization of the Union’s electricity market.” In particular, it addresses the issue of supplier risk management, which Member States are encouraged to regulate.

Unfair Competition

Directive 2024/825 is another piece of legislation designed to improve competition by curbing opportunistic behavior by certain retailers. It is known as the ECGT (Empowering Consumers for the Green Transition) Directive. Its objective is “to empower consumers for the green transition through better protection against unfair practices and through better information.” According to Article 4 of this directive, “Member States shall adopt and publish, no later than March 27, 2026, the necessary provisions … and … they shall apply these provisions as of September 27, 2026.” In France, the directive has still not been transposed.

The CRE monitors competition among electricity suppliers through the Dispute Resolution and Sanctions Committee (CoRDiS) within the limits of its authority (Article L134-25 of the Energy Code). In the Compendium published in September 2026, sanctions are listed for violations such as failure to comply with the requirement to maintain separation between a distributor and a generation or supply company (Article L. 111-64 of the Energy Code), failure to comply with the obligation to disclose inside information (REMIT Regulation), and violation of the prohibition on insider trading.

While the energy transition requires the widespread electrification of the economy, accompanied by massive investments in solar and wind energy, it cannot succeed without a radical change in consumption habits. Given the physical nature of electricity, we cannot rely on “Natural Intelligence” to make consumption responsive to scarcity signals sent by wholesale markets. Flexibility in usage will require very significant investments in energy storage and “smart” equipment, both in the grid and at the point of consumption. Since these are fixed costs that must be paid today to save energy tomorrow, small consumers will remain reluctant to invest. The government must therefore increase and improve the distribution of its subsidies (for example, Energy Savings Certificates) and, let’s remain optimistic, advances in hardware and software must significantly reduce the cost of consumption-management equipment.

Published on October 22 in La Tribune.