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EDF should sell more cheap power to rivals to cap price hikes -regulator
Global Banking & Finance Review®
Company
By Benjamin Mallet
PARIS (Reuters) – French utility EDF should sell more cheap nuclear power to rivals next year to keep a lid on soaring electricity prices, the country’s energy regulator said on Wednesday in a move that piles more pressure on the state-owned utility.
The regulator said the government should set the amount of power EDF will sell to competitors in 2023 at 130 Terawatt-hours (TWH), up from 120 TWH this year.
The watchdog recommended a minimum price of 49 euros per Megawatt hour – up nearly 17% from a price cap of 42 euros for the bulk of the power sold in 2022.
Newly re-elected President Emmanuel Macron, who faces a parliamentary election this month, is under pressure to shield consumers against soaring inflation and energy prices as the war in Ukraine and sanctions against Russia, coupled with supply chain snags, send the cost of living sharply higher.
Selling more cheap power to EDF’s competitors means they would not have to pay the much higher prices on the wholesale market, something the government would then take into account when it calculates regulated tariffs.
However, the price caps reduce EDF’s revenue.
A similar measure year by the French government this year, which set a 4% ceiling on electricity price increases, cost EDF some 10 billion euros and was among the reasons that led to a 3 billion euro ($3.2 billion) capital increase – mostly funded by the state.
“It is very important… that we use a maximum of Arenh (regulated nuclear power prices) to be exposed as little as possible to international prices,” the chairman of the energy commission, Jean-François Carenco, told a press conference.
“The only goal is to have an energy price that makes our companies competitive and does not damage the social cohesion of consumers.”
The watchdog said the government should make a decision before the summer to give all companies affected visibility on what they can expect.
EDF is facing a financial crunch due to outages at several nuclear reactors, massive investment needed to upgrade and replace its aging fleet and the government’s moves to help consumers grappling with high energy prices.
Economy Minister Bruno Le Maire said earlier this week the government would continue to shield French households this year and next from the impact of higher gas and electricity prices.
($1 = 0.9332 euros)
(Writing by Silvia Aloisi; Editing by Kirsten Donovan)
A price cap is a regulatory limit set on the maximum price that can be charged for a service, such as electricity, to protect consumers from sudden price increases.
Nuclear power is energy produced from nuclear reactions, typically through the fission of uranium atoms, which generates heat used to produce electricity.
An energy regulator is an independent authority that oversees the energy market, ensuring fair practices, setting prices, and protecting consumer interests.
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