France, EDF strike compromise deal on electricity prices

The two sides agreed on 70 euros per megawatt hour (MWh) as a 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 revenues to fund investments, and the government, which wants to keep electricity bills for French households and businesses as low as possible.

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 rises in bills. The two sides agreed on 70 euros per megawatt hour (MWh) as a 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 revenues 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 fact EDF was fully nationalised 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 allows the government to tax EDF's extra revenues at 90% if prices surpass 110 euros/MWh, in order to offset the impact on consumers.

It also envisages a review of conditions in the event of market fluctuations to safeguard the 70 euro level for EDF. The deal aims to replace a system known as Arenh, which expires at the end of 2025, 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 CEO Luc Remont, whose company stumbled to a record loss of 18 billion euros last year due to 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, whose nuclear power output supplies 70% of France's electricity, needed to ramp up output to 360 terawatt-hours (TWh), or above from 300-330 TWh forecast for 2023. "400 terawatt-hours is an ambitious nuclear production target, but within reach," he said. 

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