Tension grows between the State and EDF. The latter announced on Tuesday that he had filed an appeal with the Council of State claiming compensation from the State for 8,340 million euros. The electrician thus intends to obtain compensation for the losses caused by the “rate shield” imposed by the State. This system, which sought to contain the rise in regulated electricity prices to 4% in 2022, required a 20% increase in the annual quota of electricity sold at a reduced price to its competitors, up to 120 TWh (compared to the 100 TWh above) according to the principle of ” regulated access to historical nuclear electricity” (Arenh). The latter requires EDF to sell its energy at a very advantageous price to its competitors, compared to current market prices, to promote the diversity of offers and allow the consumers benefit from attractive prices.
A conflict that intervenes while the State announced, at the beginning of July, the nationalization of EDF for September. Beyond taking over the remaining 16% of the electrician’s capital -the State already owns 84%-, this operation raises many questions, starting with the role of EDF and what the State wants to give it, as he explained. Phuc-Vinh Nguyen, a researcher on European and French energy policies at the Jacques Delors Institute energy center at La Tribune.
Why is the tariff shield at the center of EDF’s complaints against the State?
EDF is in a difficult situation for two reasons. On the one hand, due to the weakness of the production of its nuclear park that will cause a significant deficit. In fact, traditionally, France exports electricity in the summer. However, this year, we are going to have to import it. And the weakness of the nuclear park will also be felt this winter. There is also this question of ” tariff shield » which is partially financed by EDF under Arenh.
This appeal filed by EDF, which is therefore involved, can also be seen as a means of challenging this measure. In fact, the fact that it finances the tariff shield may give rise to doubts, because EDF does not necessarily aim to protect the consumer from a possible increase in the price of energy. Rather, it is up to the government to introduce measures to support consumers. The system currently in place was put into operation in an emergency, which allowed the executive to react quickly. But it should not be intended to be permanent.
Above all because if the Arenh is negotiated at a European level, the State has accepted its establishment in France in exchange for other concessions on the matter. There is a dissonance to clarify about the image and the role that EDF should play and the one that the government wants it to play. The nationalization of EDF may perhaps clarify this situation.
What will the nationalization of EDF change?
The state already owns 84% of EDF’s capital, so the fact that it goes up to 100% won’t change much. It is, in a way, the first stage of a rocket that will allow a large-scale reform of EDF. Although the government justifies this nationalization as essential to its new energy policy, it is above all a clarification of EDF’s role in this new policy. Therefore, this has a more symbolic meaning, if only for the signal that is sent to the public. When you want to take charge of the energy policy of the country, it is better, in terms of publicity, to own 100% of EDF.
What challenges does this nationalization pose?
Although it has already been announced that the Government will launch a €9.7 billion takeover bid in early September, little is known about the timing of the takeover bid and there are several questions that need to be answered in a short time. This is particularly the case of the Arenh mechanism, which expires at the end of 2025. Therefore, it is necessary to agree on this issue with the European Commission and obtain an agreement, at least in general terms, before the next European elections that are in 2024. Because the key players in this file are not only Emmanuel Macron and the Minister of the Economy, Bruno Le Maire, but also the European Commissioner for Competition, Margreth Vestager. However, it is not certain that she will continue to hold this position after the elections.
Another issue is likely to raise tensions: that of the reform of Hercules (this project plans to divide EDF into three entities: a public company for nuclear power plants, another listed on the stock exchange for the distribution of electricity and renewable energies, and a third dedicated to hydroelectric dams, editor’s note). When it was debated in 2019, the issue sparked strong tensions among unions who feared a dismantling involving a form of privatization. However, the question of the Hercules project could well come back on the table. The State, therefore, will have to clarify the direction in which it wants to go.
Finally, above all, it will be necessary to provide guarantees of the technical viability of the energy policy desired by the State by nationalizing EDF, and this remains a great unknown. The State will put its hands in the wallet, but will EDF be able to deliver the EPR orders? Does the group have the necessary manpower and experience? Which doesn’t seem obvious at the moment. Answers are also expected on the succession of its CEO, Jean-Bernard Lévy. The challenges ahead for EDF are considerable and we need to find someone who is familiar with energy issues. Finding the ideal candidate is not an easy task, especially in such a short time, since all these questions require quick answers.
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