The French government is considering additional measures to curb the impact of the sharp rise in market prices for electricity on French consumers, a source in the executive said Thursday.
Confirming information from Figaro, this source clarified that the measures included the possibility for the executive not to apply the formula for calculating EDF tariffs next February, as well as the potential increase in nuclear electricity volumes that the group is forced to sell to its competitors at a preferential price.
EDF shares fell sharply on the Paris Stock Exchange at midday in reaction to information from Figaro, according to a trader and analysts.
The title of the leading French producer of electricity lost 3.95% to 12.29 euros around 1:10 p.m., showing one of the most marked declines in the European Stoxx 600 index, which fell 0.22%.
The proposed new plan follows the promise of Prime Minister Jean Castex limit the increase in regulated tariffs (TRV) to 4% in February and for 2022 as a whole.
This limitation was to be achieved through a reduction in the electricity tax (TICFE), a measure that the surge in prices on wholesale markets today risks rendering insufficient even in the event of a reduction in the tax on electricity. zero, the cost of which to public finances is already estimated at eight billion euros.
The source interviewed by Reuters clarified that the implementation of the new plan would result in an amendment to the 2022 finance bill allowing the ministers of Economy and Energy to “set a lower tariff level” what would be expected from the application of the formula for calculating the TRV in the event of an increase “exceptional” market prices.
“Everyone agrees that it is essential to preserve the purchasing power of households and that it is also necessary to preserve public finances”, argued the source.
Discussions initiated with Brussels
a “catching up” However, could take place in 2023 through a gradual increase in tariffs over twelve months, in order to cover the losses suffered by EDF due to the limitation of the TRV in February 2022.
The executive is also consideringincrease from 100 to 150 terawatt-hours (TWh) the volumes of electricity that the group must sell to its competitors under the Arenh system (regulated access to historic nuclear electricity), which ensures a preferential purchase price for alternative producers, in the second half of 2022.
Such a device would prevent the latter from having to pay very high prices on the wholesale markets, which would have repercussions on the prices applied to individual customers.
However, its implementation will require a green light from the European Commission. “Discussions have started, we are hopeful that this will be successful in early 2022”, the source said.
“Regulation appears to be a burden for the group”
“This is a first step towards a sustainable functioning of the French market which can establish a fair exposure of French consumers to the evolution of costs.”
EDF declined to comment on this information.
Its CEO, Jean-Bernard Lévy, regularly calls for the removal of Arenh – which he compares to “a poison” – by arguing that the system forces the group to go into debt and limits its investment capacity while subsidizing its competitors.
“Once again, regulation appears to be a burden for the group”, estimates Nicolas Bouthors, analyst at Alphavalue.
“In my opinion, the most likely explanation for today’s negative stock price reaction is investors’ fed-up with the weight of regulation and political inference.”, he adds, stressing however that the measures envisaged should have only a limited impact for EDF.
Barclays analysts see a “buying opportunity” in the decline in EDF shares given the context of still very high electricity market prices.