Why EDF is exasperated by the contradictory expectations of its public shareholder

Published on : 19/01/2022 – 07:01

Nothing is going well for EDF, the French electricity champion: its action has been unraveling since the government forced it to help its competitors to resist soaring prices. Both the boss and the unions are outraged by this very political decision. How did this model company get here?

The 84% state-controlled company has been swimming in absurdity for ten years. Since the Arenh mechanism, regulated access to historical nuclear electricity, it has been forced to sell part of its production at low cost to its competitors. It is to satisfy the European decision to open the energy market to competition that this lame device was invented, in defiance of the basic rules of competition.

Operators rub their hands: they take advantage of cheap goods that they redistribute to French households without ever having invested a penny in production. This gas machine, decried for years, more or less worked as long as the price of French electricity produced in largely amortized nuclear power stations remained moderate.

But the electricity surge facing all of Europe is a game-changer

The French who have the cheapest current in Europe should also suffer substantial increases in their bill. But as we are in full recovery, with an economy already very tested by years of covid, and especially as we are in an election year, a few months before the presidential election, the government is sparing individuals and imposing a price freeze.

For the main French producer, it’s a double penalty: it cannot increase its customers’ prices and it must also supply more power to its competitors at a floor price: 46 euros per megawatt hour, which is worth 300 on the market. The decision was announced on Friday and since then there has been consternation within EDF.

How much will this pre-campaign “promotion” cost him?

This represents 8 billion euros less revenue. It’s regarding the same deadweight loss for the state, which also waived a large part of the electricity tax to stop inflation. In the short term, households are winners, but when it comes down to it, it is always the taxpayer who will pay the bill.

To come to the aid of EDF, as the State does regularly, and to plug the public deficit which will continue to widen. A heresy denounced by all economists specializing in energy. And by the boss of the company, Jean-Bernard Levy, shocked by this decision, just like the employees.

Yesterday 4 unions launched a strike slogan for next week. Because the company which already has very proven finances has in front of it a wall of investments to be made. They amount to between 150 and 200 billion euros over the next twelve years. A sum impossible to find on the markets when the action tumbles.

How can the company get out of this crisis?

As the State is its majority shareholder, its fate depends on a political decision. The current campaign lends itself to this. Jean-Luc Mélenchon for the radical left has long advocated its renationalization. And he is now joined by the environmental candidate Yannick Jadot. This would give it the means to face the challenges of the energy transition and the aging of its nuclear fleet.

Economists first think that it is necessary to get out of this device regulated access to historical nuclear electricity. To allow the emergence of a healthy competition between actors present on the production as on the marketing of electricity.

► IN BRIEF

A tax on the super rich might solve extreme poverty.

A progressive tax of 2% on income exceeding 5 million dollars and going up to 5% beyond the billion would bring in 2520 billion dollars according to the alliance to fight once morest inequalities bringing together several NGOs including Oxfam. Earlier this week, Oxfam denounced the record enrichment of large fortunes during the period of covid, their wealth has doubled.

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