Electricity market in France: the Court of Auditors calls for rapid changes

Electricity market in France: the Court of Auditors calls for rapid changes

The Court of Auditors publishes Tuesday (July 5) a severe report on the growing dysfunctions of the electricity market in France for 10 years, asking the government for a rapid change, within 18 months, of the regulatory tools put in place since the liberalization of the European electricity market.

The Court embarked on a rare and unique assessment of the complex public policy put in place over the past ten years to try to comply with the Brussels requirements to introduce competition into the electricity markets, while trying to preserve low tariffs for consumers, resulting from the long-depreciated nuclear power of the incumbent public operator EDF.

Its verdict is final: the organization of the electricity market in France “is no longer readable or controllable”, underlines the Court in this report of 268 pages which is published Tuesday by the magistrates of the street Cambon, after more than one year of work. It encourages public authorities to negotiate before “no later than the end of 2023” a new means of regulation.

To arrive at its finding, the Court dissected the operation and the gradual slippage of the three main intervention mechanisms put in place by the Nome law (new organization of the electricity market) of 7 December 2010 to regulate the market.

These are the Regulated Sales Tariff (TRV), from which nearly 70% of households benefit, Regulated Access to Historic Nuclear Power (Arenh) which grants a reduced price until the end of 2025 on an annual electricity quota nuclear energy sold to industrial energy consumers and to alternative electricity distributors, and finally “capacity mechanism”.

This “gentleman’s agreement”, very profitable between large industrial consumers, makes it possible to prioritize needs to avoid blackouts during winter consumption peaks. The European Commission only accepted it until 2026.

The Court notes that the TRVs, supposed to protect consumers from sudden changes in the wholesale markets, and accepted by way of derogation by Brussels, have been since 2019 “more and more exposed to variations in market prices”.

The system set up around the incumbent operator to mechanically instil a kind of competition has de facto created an inflation in electricity prices, underlines the Court. In fact, EDF is no longer able to guarantee that consumer prices will be aligned with its production costs, which was the objective, note the magistrates.

The Court also points out that the Arenh scheme “did not go as planned” but that it allowed “the coverage of full EDF costs” over the ten years, even emphasizing that the “Global revenues from nuclear production were 1.75 billion euros higher than the accounting costs of this production between 2011 and 2021”contrary to what EDF and its unions claim.

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