EDF and French Government Reach Deal on Electricity Costs

After months of intense negotiations, state-controlled power group Electricite de France (EDF) and the French government have reached a tentative deal on future nuclear power prices. The agreement, still in the finalization stage, establishes 70 euros per megawatt hour (MWH) as the reference level for power prices, reflecting a delicate compromise between EDF's revenue goals and the government's commitment to keeping electricity costs low for households and businesses.

The preliminary deal incorporates mechanisms to safeguard consumers in case power market prices exceed 110 euros/MWH, with additional clauses providing a price guarantee for EDF. Notably, the agreed reference price closely aligns with EDF's nuclear production costs, contributing to 70% of France's electricity. The government retains the option to tax EDF's additional revenues at 90% should prices surpass the upper limit, ensuring a balance that offsets the impact on consumers.

French wholesale electricity prices, still above 100 euros/MWH, underscore the significance of this accord, particularly given the challenges EDF faced in 2022, ending the year with an 18 billion-euro loss and substantial net debt. The final agreement, expected to be officially announced this week, follows a meeting between key figures from EDF and government ministers, settling the details on price thresholds and tax rates.

Source: reuters.com