He assumed Bringing EDF into the 21st century », according to the Minister of Economy, Bruno Le Maire; After three months, it is already crumbling. Announced with much fanfare in Bercy last November, the agreement between EDF and the state on electricity prices in France after 2025 will soon no longer be relevant. However he had to ask ” Foundations of new regulation of nuclear power » To contain customers’ bills while allowing the energy company to find its way financially, executives are already exploring other options.
“There are other potential measures that we’ve got in Europe (along with electricity market reforms, editor’s note). We have not ruled out the idea of using it,” the new Minister of Energy and Industry, Roland Lescure, said during a meeting with a few reporters on Wednesday.
Which would also explain why the government wants to withdraw the chapter on “energy sovereignty” from its bill on price regulation despite the impatience of businessmen, eager to know future electricity prices today. Indeed, according to a source close to the matter, Bersi is delaying for fear that the system negotiated with EDF will ultimately not be suitable and will require adjustments.
The agreement does not provide for any parachute in the event of a fall in the market price
Concretely, the agreement reached in November involves letting EDF largely define its sales prices by market accounting, with the state deducting profits above a certain very high amount. Thus, public authorities will only intervene if prices exceed 78 to 80 euros per megawatt hour (MWh), taking half of the profits beyond this threshold and 90% above 110 euros per MWh. In other words, below this very high amount compared to pre-crisis levels, EDF will have free reign. Apart from these exceptional cases, prices therefore depend on supply contracts entered into between the historic electrician and its professional customers, both industrial and suppliers, for medium and long-term deliveries.
The only thing is: for several weeks, electricity prices in the markets have been falling. This is due to reduced energy consumption, weak economic growth forecast and better availability of production equipment. As a result, contracts, intended to work in the event of very high prices, may well prove obsolete. Because there is no safety net provided in case wholesale prices fall below EDF’s production costs, as we explained in January.
For several weeks, electricians have been slow to contract with manufacturers and suppliers, perhaps because the latter demand, in most cases, a price below its reserve price (ie, the price below which it refuses to contract). ” I call on EDF and the producers to sign the agreement as quickly as possible », Roland Lescure argued on Wednesday, helpless against the phenomenon that the executive was apparently not coming.
The auction system is struggling
The system put in place by EDF in September to “test” the market illustrates this perfectly. The company has in fact created an auction system for which EDF “ constitute retail prices » In the next few years, from Most markets, from automobile production companies to food distribution groups, VSEs and SMEs ” The goal: to supply over five years at a price known in advance determined by auction, to allow these players to anticipate its income.
However, in the last fortnight, this auction system has resulted only once… only 65 euros per MWh for delivery in 2028.” In real terms, it will probably be even less, as future inflation must be taken into account », notes Jacques Persebois. Since mid-January, no deliveries for 2028 have reached the 70 euro per MWh mark, and auctions are mostly yielding nothing. In November, however, this system exceeded prices Between 80 and 85 euros for 2027 and between 70 and 77 euros for 2028. The bad: In September, EDF also estimated that the 2027 and 2028 auctions would result in prices “ Shouldn’t be too different from what we’ve seen in recent weeks (…) so for this horizon (…) a little less than 100 euros » !
The price of the floor?
In this context, another option the government is considering is the Contract for Difference (CfD), a mechanism that was rejected late last year. The idea: define a ceiling price beyond which EDF’s profits will be taken by the state, but a floor price below which it compensates the company for the sale of its output.
So far, such a system has been rejected by EDF, which is betting on high prices and doesn’t want to see its production heavily regulated by public authorities, preferring to sell on its own terms.
“He probably thought that there was no significant risk in the long term, that wholesale prices would always be above 70 euros/MWh,” explained Jacques Persebois a few weeks ago.
Moreover, the group wanted to avoid a crackdown on it by the Brussels executive, particularly in the renewable sectors such as the Grand EDF project (formerly Hercule) by separating it. And this, on the basis of very strong protection provided by the state to counter market risks.
It remains to be seen whether the agreement will actually be amended. The executive is leaving it until the summer before preparing a full assessment, and may pass future regulatory frameworks in the next Finance Bill (PLF), even if nothing is enacted. When asked, EDF did not want to comment.
