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Spain’s Iberdrola terminating a large number of French retail power contracts as prices soar

The logo of Spanish utility company Iberdrola sometimes appears outside its headquarters in Madrid, Spain, May 23, 2018. REUTERS/Sergio Perez/File Photo

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  • Iberdrola says cannot provide competitive charges for now
  • Wholesale prices high while retail contract prices fixed
  • Tells clients to get other supplier or risk losing power

PARIS, Aug 19 (Reuters) – Spanish utility Iberdrola is terminating power contracts with a large number of its French customers due to unprecedented power price rises, it said in a letter seen by Reuters.

Iberdrola, among EDF’s biggest competitors in France, said it recommended customers change to some other supplier.

“We invite one to change supplier…If you don’t, you risk an interruption to your power by the end of one’s contract with Iberdrola,” the business wrote to customers.

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An Iberdrola (IBE.MC) spokesman in Madrid confirmed the firm was terminating some contracts in France, but said on Friday the business was not taking out of the French retail market.

He said only “several thousands” of contracts have been suffering from the move.

“We usually do not desire to automatically renew contracts with existing customers just because a large amount of them will be badly affected. It is best to allow them to choose the regulated tariff in France,” he said.

He declined to specify just how many French retail customers Iberdrola has, but industry estimates put the quantity at between 400,000 to 500,000.

The spokesman said that nearly all Iberdrola’s French customers don’t need to renew their contracts until 2023 or beyond.

Iberdrola said that by the end of 2021 its retail customer base in Portugal, France, Italy and Germany combined was 1.9 million contracts, a rise of 5% in comparison to end 2020.

In France, Iberdrola sold 1,313 GWh of power and 801 GWh of gas this past year.

Following opening of the French power market and the sharp drop in power prices after some duration ago, several upstart companies, major non-power companies such as for example retailer Leclerc and foreign energy giants such as for example Iberdrola piled in to the market, offering rates cheaper than EDF’s.

Energy regulator CRE has estimated that in 2021 EDF (EDF.PA) was losing almost 100,000 customers each year. But a sharp rise in power prices because the start of year has made the business enterprise model for alternative suppliers more challenging and the trend has reversed.

An EDF spokeswoman said the firm had won back some 300,000 clients because the start of year.

“Some alternative suppliers are actually struggling because they are forced to get power at high wholesale prices and must sell at a comparatively low, contractually set, retail price,” university Paris Dauphine-PSL economics professor Frederic Gonand said.

Iberdrola said it could continue steadily to supply French consumers.

“The extremely high prices and extreme volatility in today’s global energy context constrain us to transfer these costs to customers when establishing a fresh contract term,” its spokesman said.

He added that Iberdrola must procure energy from the marketplace and therefore will never be in a position to provide power at competitive prices. It said its prices would have to be way greater than EDF’s regulated tariffs and didn’t desire to force customers to cover price levels they will have not explicitly chosen.

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Reporting by Geert De Clercq, editing by Silvia Aloisi

Our Standards: The Thomson Reuters Trust Principles.

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