France and EDF strike compromise deal on electricity prices

Steam rises from a cooling tower of the Electricite de France (EDF) nuclear power plant, in Golfech, France, November 9, 2023. REUTERS/Stephane Mahe/File Photo Acquire Licensing Rights

PARIS, Nov 14 (Reuters) – The French government and utility EDF have reached a deal on future nuclear power prices in a compromise they said would allow EDF to be profitable while shielding consumers from sharp increases to bills.

The two sides agreed on 70 euros per megawatt hour (MWh) as an average reference level for nuclear power prices, confirming a Reuters report.

The deal puts an end to months of fraught negotiations between EDF, which is eager to maximise revenue to fund investments, and the government, which wants to keep electricity bills for French households and businesses as low as possible.

“This deal was indispensable to guarantee the competitiveness of our industry, the visibility and stability of prices for our households and the development of EDF,” finance minister Bruno Le Maire told reporters.

He said the full nationalisation of EDF this year did not mean it could function at a loss.

“We are not in the Soviet Union,” Le Maire said.

“EDF must be able to be profit making and raise the money it needs for future investments.”

The agreement, which needs approval from the European Commisison, stipulates additional revenue made by EDF if prices surpass 110 euros/MWh will be taxed at 90% to help offset the impact on consumers.

It also envisages a review of conditions to safeguard the 70 euro level for EDF in the event of market fluctuations.

A spokesman for the European Commission said it had no comment on the agreement at this stage.

“It’s for a member state to assess if a specific measure involves state aid and, if it does, it will need to be notified to the Commission,” he said.

The deal aims to replace a system known as Arenh, which expires at the end of 2025 and under which EDF sells a chunk of its production to third-party distributors and industrial groups at a set price of 42 euros/MWh.

French wholesale electricity prices are still above 100 euros/MWh after climbing to 1,200 euros during last year’s energy crisis in the wake of Russia’s invasion of Ukraine.

EDF Chief Executive Luc Remont, whose company stumbled to a record loss of 18 billion euros ($19.3 billion )last year because of outages at its nuclear reactors and a government-imposed cap on electricity bills, said the new deal was “demanding” for his company.

He said EDF, the nuclear power output of which supplies 70% of France’s electricity, needed to ramp up production to 360 terawatt hours (TWh) or more, from the 300-330 TWh forecast for 2023.

“400 terawatt hours is an ambitious nuclear production target, but within reach,” he said.

($1 = 0.9334 euros)

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