2023-11-28 17:52:00
Is the mechanism which forces EDF to sell part of its nuclear production at a price regulated by the State, and one might say today broken, such a bad deal for the energy company? For years, its leaders have not hesitated to point the finger at this system, known to specialists by the acronym ARENH (regulated access to historic nuclear electricity). It would even be a “ poison “, according to former CEO Jean-Bernard Lévy, guilty of having “ penalized EDF » said recently on FranceInfo his successor, Luc Rémont.
Almost unanimously, this system would have increased the already staggering debt of the group, recently 100% nationalized. And for good reason, since 2011, it has forced the electricity producer to cede 100 terawatt hours (TWh) to its competitors, that is to say a quarter of its nuclear production at the time, at 42 euros per megawatt hour (MWh). ). This is an amount lower than its production costs, which have risen to reach more than 60 euros per MWh today. While market prices are exploding, this sale at a loss would therefore necessarily have deteriorated the group’s finances. While enriching its competitors, alternative providers, at the expense of users.
“Excess remuneration” linked to the development of competition
The reality is more nuanced. In recent years, EDF has benefited from a significant windfall effect due to flaws in the system, by selling ARENH rights at a level much higher than 42 euros per MWh. So that in 2019, 2020 and 2021, these flaws have “ made it possible to increase EDF’s nuclear production revenues by 1,085, 851 and 932 million euros respectively », according to a report from the Court of Auditors on the organization of electricity markets published in July 2022. And this, ” in favor of EDF and to the detriment of consumers » affirms the financial jurisdiction. However, in 2023, this additional revenue should explode well beyond a billion euros.
Worse: it was by separating itself from customers that the energy company was able to free up these resources. “ The more EDF loses market share in supply, the more EDF’s revenues from nuclear power production increase, in a context of wholesale prices higher than the ARENH price. », already alerted the Energy Regulatory Commission (CRE) in the summer of 2020. So much so that the continued development of alternative suppliers might lead to a “ over-remuneration of EDF », and therefore to an increase in prices, according to the competition authority.
“As competition grows, prices rise. It’s absurd. […] In this context, the EDF commercial director will seek to win customers and the financial director to slow him down! », says an informed source who requested anonymity.
ARENH 100 TWh ceiling
To understand this, we must delve into the way in which the ARENH works, which will expire at the end of 2025. Originally, the objective is to encourage the emergence of new players on the energy supply market. . In other words, to allow these operators to sell electricity to their customers, without necessarily producing it themselves, while nevertheless playing on equal terms with EDF. For this reason, it was decided that they would have access to part of the nuclear production of the historic operator, who has a monopoly on this activity.
Concretely, each customer of an alternative supplier entitles them, in theory, to 67% of ARENH. In other words, if their customer portfolio amounts to 100 kWh, they can buy 67 kWh of ARENH at 42 euros per MWh. However, over the years, the number of households having subscribed to one of these sales representatives rather than to EDF has exploded, so much so that in 2023, they were able to request, overall, around 150 TWh of ARENH .
The only thing is: from the outset, the State set a ceiling of 100 TWh. Alternative suppliers were therefore only entitled to two thirds of their demand, which was “capped” by 50 TWh.
Supply conditions replicated in the regulated tariff
And this is where the problem lies: this capping, that is to say the difference between the ARENH rights and the volume actually transferred at 42 euros/MWh, is taken into account in the regulated electricity sale tariff. (TRV) from EDF, this subscription supervised by the State to which 21 million French people have subscribed. Indeed, in order not to advantage EDF, this offer replicates the supply conditions of its competitors, and thereby the 50 TWh of ARENH which were refused to them under the cap. However, the administration considers that these volumes must have been purchased by the alternatives “ at market prices averaged over the single month of December preceding the year of consumption “. That is to say one of the worst months of the year 2022, during which prices exploded to 400 euros per MWh, or almost 10 times the regulated rate!
Obviously, this formula inflates the TRV marketed by EDF. What ” allows you to sell your electricity more expensively to the customers concerned, without this increase having any link with an increase in your production costs » explained the Court of Auditors in the summer of 2022. In other words, the more EDF lost customers, the more the ARENH capping increased… and thereby, indirectly, the price of the TRV sold by EDF.
It is in particular because of this phenomenon that the CRE proposed a 35% increase in the TRV in February 2022, at the height of the energy crisis…and approximately +100% in February 2023 and August 2023 (excluding tariff shield paid by taxpayers).
Billions of euros in additional revenue
And that’s not all: in practice, EDF replicates the ARENH capping to scale its supply costs in all its offers to individuals! Which lead to, ” in total “, has ” increase [son] unit income, both on its sales to TRVs and on its sales in market offers », notes the Court of Auditors.
« However, EDF may not increase its retail prices as much when the ARENH ceiling is reached, since the company retains direct and rationing-free access to its own nuclear production. », Adds the financial jurisdiction.
It remains to be seen the impact on the group’s revenues in 2023, which will inevitably be much greater than in previous years given the explosion in market prices last December. For the moment, however, no official figures have been communicated. Some observers are already talking regarding additional revenues of several billion euros, and which might even reach around twenty billion euros! When questioned, neither EDF nor CRE wished to comment on this figure.
Windfall effect or not?
Faced with this perverse effect – which is not due to EDF policy, but to regulations – the Energy Regulatory Commission (CRE) proposed in 2018 to increase the energy ceiling to 150 TWh. ‘ARENH, in order to limit or even eliminate the capping phenomenon. And this, at the same time increasing the price by 42 euros per MWh so that it covers EDF’s current production costs, as requested by the Court of Auditors. CRE’s lobbying has also been strengthened since autumn 2021, given the increase in market prices.
The only thing is: the government did not follow this recommendation. It was only in January 2022 that it finally took the decision to urgently raise the ceiling to 120 TWh, faced with an explosion in prices that were now unmanageable.
« The decision came very late, il would have been preferable to say it in the second half of 2021. In January 2022, EDF had already sold the corresponding quantities of electricity on markets [les fameux 20 TWh supplémentaires, ndlr]. He therefore had to buy them back at 270 euros per MWh to sell them at 42 euros! In this case, there is no doubt that this decision made EDF bear a significant part of the cost of the 2022 tariff shield. », explains a CRE spokesperson to La Tribune.
Apart from this particular case which has indeed harmed EDF, a question arises: can the additional income generated by capping be considered as a “gain” for the energy company? Compared to a situation where the ARENH did not exist, EDF remains a loser. The Court of Auditors in fact noted that “ the implementation of the ARENH did not go as planned, but allowed the full costs to be covered “, while emphasizing that in the absence of ARENH, nuclear revenues would probably have been ” higher ».
And for good reason, in an unregulated monopoly, the historic operator might have sold all of its production according to its conditions, following market prices, without link to its real production costs. Which would have led to an even greater explosion in consumer bills in recent months, while allowing the group, at the same time, to generate gigantic profits (even if its financial situation would have suffered from the catastrophic performance of the park in 2022 , linked in particular to a corrosion defect identified in certain reactors).
Finally, the ARENH system was rather damaging to EDF when market prices fell, between 2015 and 2017. In fact, the ARENH has another flaw: the alternatives have no obligation to ask EDF to sell volumes to it at 42 euros per MWh when prices fall below this rate. And, in practice, have not done so. Which did not allow “ to guarantee EDF that its production costs will be covered » during these periods, notes the Court of Auditors. However, the future system, presented a few days ago by EDF and the executive to take over from ARENH from 2026, does not resolve this problem either: as it stands, no mechanism will protect EDF in the event of fall in prices below its production costs.
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