UPDATE 2-French court repeals law on regulated gas prices

(Adds Engie comment)

PARIS, July 19 (Reuters) - France's highest administrative court on Wednesday repealed a law on regulated gas prices, which covers about half of France's retail customers and 11 percent of professional users, saying it hurt competition and was against European Union regulations.

The court's decision does not mean an immediate end to regulated gas prices in France because some of the rules were included in a 2015 French energy bill, which can only be repealed by a government decree.

"The Council of State ... repeals the decree of 16 May 2013 on regulated tariffs for the sale of natural gas on the grounds that the maintenance of such tariffs is contrary to European Union laws," the court said in a statement.

ANODE, a lobby for alternative retail energy suppliers, had taken the issue to the court, arguing the regulated gas scheme gave an unfair advantage to energy group Engie.

State-controlled utility EDF and Engie, in which the government holds a stake of more than 28 percent, have retail market shares of 86 percent and 77 percent respectively nearly a decade after the French market was opened up to competition.

Regulated gas tariffs for about 5.4 million residential customers are set each month by the government after consultation with France's CRE energy market regulator.

French government was not available to comment immediately.

Engie said it was now up to the government to decide whether to annul the decree on regulated tariffs. It also said the court's decision did not question existing contracts to avoid market uncertainty.

"It is the governments responsibility to deal as quickly as possible with the consequences of this decision through the legislative route," Engie said, adding that customers would need a long transitional period.

The company said the decision should be applied as quickly as possible to the regulated tariffs for the sale of electricity to avoid any market distortion.

Engie had said in the past that the regulated pricing enabled it to meet public service obligations, including guaranteeing the security of supply, while the French government has said the mechanism protects the long-term purchasing power of consumers.

An end to the regulated gas prices could benefit smaller or foreign players such as Direct Energie and Italy's Eni, which could try to win customers by offering more market-based prices. (Editing by Sudip Kar-Gupta and Jane Merriman)