ORGANISATION OF THE

ELECTRICITY MARKETS

Rapport public thématique

Public policy evaluation

July 2022

2

Executive summary

In a European electricity sector that has been open to competition since the early

2000s, France has developed a public policy for organising the markets based on

several structuring intervention mechanisms in order to achieve national objectives.

Electricity is a basic consumer good for households as well as a factor of production for

industry, the price of which can be decisive for its competitiveness. In 1945, France chose to

nationalise the public electricity service (production, transport, distribution and supply), entrusting

it to Électricité de France (EDF).

In the 1990s, the European Union set out to extend internal market rules to the electricity

sector. With the successive adoption of four Directives of the Parliament and of the Council in

1996, 2003, 2009 and 2019, it has sought to open up the electricity generation and supply sectors

to competition and to remove barriers to access to national grids and interconnections, also

promoting cross-border trade.

These directives have had consequences for the organisation of the electricity sector: within

EDF, electricity transmission and distribution activities have been separated from generation and

supply activities and entrusted to its subsidiaries Réseau de Transport d’Électricité (RTE) and

Enedis. Alternative suppliers (to the historical suppliers, i.e. EDF and local distribution companies1

- LDCs) have emerged. Two types of electricity market have developed: wholesale markets2

between electricity producers and suppliers, and retail markets between electricity suppliers and

end customers.

Trade of electricity

Source: Court of Accounts

1

The historical electricity supplier is EDF or, in some municipalities (which account for less than 5% of customers),

a local distribution company (LDC) such as, for example, Électricité de Strasbourg or Usine d’Électricité de Metz.

2

The wholesale market refers to the market where electricity is traded (bought and sold) for supply to end customers

(residential or business).

3

Within this new context of opening up to competition at European level and faced with an

increase in market prices from 2005 onwards, the public authorities in France have defined and

implemented a public policy for organising the electricity markets by using regulation and intervention

mechanisms. This French policy defines the scope of the evaluation conducted by the Court.

The objectives of the French policy stem from the particular characteristics of the French

production system, which is distinguished within Europe by the weight and competitiveness of

its historical nuclear fleet. Indeed, in the absence of public intervention, the opening up to

competition on a European scale would have resulted in French customers being supplied at

wholesale electricity prices likely to be significantly higher than the production costs of French

plants. This risk is illustrated by the surge in wholesale electricity prices in 2022, in line with

gas prices. The public authorities therefore sought to give French customers the comparative

advantage of the low production costs of the historical nuclear plant pool.

However, this national market organisation policy and the corresponding arrangements

had to remain compatible with competition law and the rules of the internal electricity market,

which are themselves evolving. In this context, the French authorities have adopted a “new

organisation of the electricity market” by the law of 7 December 2010 of the same name

(NOME law). It had several objectives: to allow competition between suppliers in accordance

with the European framework, to guarantee stable prices for consumers that reflect the

competitiveness of existing nuclear plants, to ensure the financing of these plants and to have

sufficient capacity to guarantee the balance between supply and demand.

To this end, the NOME law based public intervention on three main mechanisms. It thus

introduced regulation upstream of the wholesale of nuclear production, via the introduction of

regulated access to historical nuclear electricity (ARENH). The ARENH mechanism

accompanied the definitive abolition of regulated tariffs for large and medium-sized companies

from 2011. It was intended to ensure that all end customers could benefit from the

competitiveness of the nuclear fleet, and to give alternative suppliers the means to compete

with EDF. At the same time, the law created a specific mechanism to guarantee security of

supply, in particular during periods of tension between supply and demand: the capacity

mechanism. Finally, it has reinforced the regulation of retail prices for households and small

businesses by maintaining their eligibility for the regulated tariffs (TRVs) that the historical

operators (EDF and local distribution companies) are compelled to offer.

Initial sequencing of public objectives and mechanisms associated with the NOME law

Source: Court of Accounts

4

After more than ten years of application of the NOME law, the market shares of

alternative suppliers have increased significantly in the retail market3. In particular, they

exceed 50% in the professional customer base of large and medium-sized companies, even

though the historical operators still play a very important role. In contrast, the generation

segment remains largely dominated by EDF, which still assures 85% of national generation.

The integrated nature of EDF, which uses most of its production directly to supply its own end

customers, reduces the liquidity of exchanges on the wholesale market.

Changes to alternative supplier market shares since 2010 (by consumption volume)

Source: Court of Accounts based on CRE data

–

retail market observatory

The

Commission de Régulation de l’Énergie

(CRE) monitors the proper functioning of

the electricity wholesale and retail markets and regularly publishes a report on the development

of competition as part of its retail markets observatory. For its part, the Competition Authority

has received numerous requests for opinions on the sector and has handed down several

decisions in the context of its contentious functions. These two institutions are also responsible

for evaluating both the ARENH mechanism and the TRVs.

No institution has drawn up a consolidated assessment of the three public policy

mechanisms for organising the electricity markets, namely the TRVs, the ARENH mechanism

and the capacity mechanism. The Court has set out to establish this assessment of the specific

results and combined effects of the implementation of these measures, based on the following

three evaluative questions:

-

To what extent has the regulated tariff system contributed to ensuring that end

customers benefit from stable and competitive prices within the context of the

opening up of the markets to competition?

-

To what extent has the implementation of regulated access to historical nuclear

electricity (ARENH) had an impact on EDF’s ability to cover the production costs of

existing nuclear power?

-

Does the capacity mechanism proportionately remunerate the means of production

mobilised for peak consumption?

3

The retail market is where contracts for the supply of electricity to end customers are offered and concluded.

5

It is therefore the public policy of organising the electricity markets decided by France that is

the subject of this evaluation by the Court of Accounts, and not the liberalisation of the electricity

sector adopted by the European Union.

In response to the above-mentioned questions, the evaluation leads to the following

conclusions.

The TRVs are increasingly exposed to market price variations, at the risk of

moving further away from EDF’s production costs.

The regulated tariffs (TRVs) were the only retail pricing method of the former public

monopoly. They aimed to limit the prices paid by end customers to the strict coverage of the

operating and development costs of French production facilities and the electricity network.

Liberalisation of the sector, through successive European directives, aims on the other

hand to let the market set wholesale and retail prices, through the interplay of supply and

demand and through free and undistorted competition between producers and between

suppliers. In the absence of regulated prices and due to the strong nuclear element of the

French generation fleet, liberalisation would therefore have exposed French consumers to

more volatile prices that would have significantly exceeded the costs of the national power

plants.

Although European law considers any regulated price to be a barrier to competition and

is increasingly limiting the possibilities of using them, France has so far been able to retain

TRVs, but within a scope now limited to households and certain small businesses. France is

one of the European countries with the highest proportion of households benefiting from a

regulated tariff (67% at the end of 2021). Nevertheless, successive governments have

considered that the maintenance of regulated tariffs was only possible if an effective

“contestability” of the TRVs was ensured. This principle, based on European law, means that

alternative suppliers must be able to offer tariffs that are at least as attractive.

The continuance of TRVs on the retail market was intended, in particular, to ensure the

stability of retail prices over time (even if the level of the TRVs is reviewed every six months)

and to control supplier marketing costs and margins. At the same time, in order to ensure their

“contestability”, the level of the TRVs had to be based not on EDF’s production costs but on

the supply conditions of alternative suppliers.

The TRVs have therefore been calculated every year since 2015 by “stacking” the

different cost components, including several related to supply costs. The ARENH supply

component, which corresponds to customers’ “baseload” consumption

4 (representing nearly

70% of total annual consumption for a household), is valued at the ARENH regulated price,

which is supposed to reflect the production costs of the historical nuclear fleet, their

competitiveness and their stability. The market supply component reflects complementary

needs (representing around 30% of total annual consumption for a household). It is valued by

reproducing the purchasing strategy on the energy futures and capacity markets (see

below

)

of a supplier implementing a prudent supply policy smoothed over a 24-month period.

However, since 2019, the annual requests for ARENH from alternative suppliers have

exceeded the 100 TWh

ceiling that the law allows them to obtain to supply their “baseload”

customers. The requests of alternative suppliers are then “capped”, meaning that they are not

served in full, but only up to a percentage. This capping increases the average cost of supply

for these suppliers, since they must then supplement their “baseload” by resorting to the market

and, since 2019, do so at a higher price than the ARENH price.

4

The baseload consumption corresponds more or less to the withdrawal of the power demand during off-peak

periods at all times of the year.

6

ARENH capping levels (due to differences between volumes requested and delivered)

Source: Court of Accounts

To ensure the “contestability” of the TRVs, CRE, which is responsible for proposing

changes to these tariffs each year, passes on this increase in the supply costs of alternative

suppliers in the calculation of the TRVs. This repercussion takes the form of a reduction in the

weight of the fixed-price ARENH component, which is now less than 50%, in favour of a

component valued at a higher and much more volatile market price reference. Thus, the more

ARENH demand exceeds the 100 TWh ceiling, the more the TRVs are exposed to market

price variations. However, demand for ARENH is constantly growing with the development of

the market share of alternative suppliers, which has led CRE to recommend an increase in the

ARENH ceiling.

The methodology for taking ARENH capping into account in the calculation of the TRVs,

adopted by CRE after public consultation, is thus likely to significantly affect the degree of

stability offered by the TRVs. Without the exceptional governmental measures of the “tariff

cap”, limiting the increase in the TRVs to +4% inclusive of taxes, this methodology would have

led to an increase in the level of the TRVs of +35.4% inclusive of taxes in February 2022, which

at least justifies a review.

7

Changes in the cost items of residential blue tariffs (inclusive of taxes)

*Note: The 2022* data does not include the government announcements of January 2022

relating to the additional 20 TWh of ARENH and the limitation of the increase in the TRVs to

+4% inclusive of taxes.

Source: Court of Accounts based on CRE data

The alternative suppliers consider that the calculation method that involves “stacking”

the TRVs does not fully ensure the possibility of competing with them. However, the retail

market observatory regularly established by CRE shows that the majority of alternative

suppliers’ offers, at variable or indexed prices, have been displayed at prices below the level

of the TRVs, since 2015 and up to 2020 inclusive.

However, the surge in wholesale prices from the second half of 2021 has shown that the

relative attractiveness of different retail offers can be assessed not only in terms of their price,

but also in terms of the contractual security that the supplier can provide to customers,

particularly in terms of price reviews and contract termination.

From this point of view

, the

TRVs, regardless of their competitiveness in terms of tariffs, have embodied since 2021 a

certain security as a public service obligation imposed on the historical operator. In any case,

the difficulties encountered by some suppliers in 2021 are an incentive to strengthen the

guarantees required of active suppliers, in terms of their financial capacities and their risk

coverage policy, in order to secure continuity of service at an affordable price.

Finally, th

e way in which the TRVs are calculated by “stacking” supply cost components

leads, in principle, to a disconnection between the evolution of their level and the evolution of

EDF’s production costs. This is at least the case for the market supply component.

However,

in recent years, this disconnection has also been observed for the ARENH component, which

is supposed to reflect the production costs of the nuclear plant pool: as indicated above, this

component has seen its weight reduced and its price frozen since 2012 at a conventional level

that is far removed from actual costs and their development (see below).

In addition, CRE verifies each year that the level of the TRVs covers EDF’s accounting

production costs, excluding the return on equity. The costing method it uses should be made

public.

8

However, the evaluation shows that annual TRV levels remained close to costs until

2020, while their respective evolution factors are now largely disconnected. This result stems,

in the most recent years, from the coincidence between the increase in the TRVs, under the

effect of ARENH capping, and the increase in EDF’s unit production costs, due in particular to

the reduction in volumes produced. On the other hand, it is no longer guaranteed by the

regulation system implemented.

In response to the first evaluative question, the Court therefore notes an erosion of the

capability of the TRVs, due to the way in which they are calculated, to provide consumers with

stable prices that neutralise the volatility of wholesale market prices. It also notes that the risk

that the level of the TRVs will move significantly away from EDF’s production costs, and cause

it to lose the benefit of its competitiveness, is increasingly high, despite the recent coincidence

between the increase in TRVs and the increase in costs.

The implementation of the ARENH mechanism did not go as planned, but allowed

the full costs to be covered over the period in question.

From the outset, ARENH has been a transitional system, which expires at the end of

2025. It was intended to accompany the development of competition both upstream and

downstream of the sector, i.e. in the electricity generation segment, in particular in the

“baseload” production means, and in the segment of electricity supply to customers. Its

implementation has enabled the development of downstream competition, partly thanks to the

“contestability” of the TRVs maintained by the regulator: the market shares

of alternative

suppliers have grown significantly and by the end of 2021 reached 28% of household

consumption and more than 52% of the consumption of large and medium-sized professional

sites. On the other hand, the conditions for the development of compe

tition in “baseload”

electricity production could never be met. EDF has remained largely dominant in this segment

since 2011, and the nuclear sector

’s share of the electricity mix has fallen little in 10 years: it

has gone from around 75% of production to around 70%.

Certain features of the mechanism have been called into question. In particular, EDF

denounced its lack of symmetry, as the use of the ARENH mechanism is optional for alternative

suppliers, whereas EDF’s obligations are not. The alternative sup

pliers consider that the

system also contains elements of asymmetry to their detriment, for example through the

penalties that are imposed on them alone in the event of obtaining excessive ARENH in

relation to their customers’ consumption.

In addition, the ARENH price was to be set by reference to the economic conditions of

the production of the historical nuclear fleet, in order, on the one hand, to cover its costs and

to allow its complete amortisation at the end of 2025 (reflecting a forecast life of the reactors

of 40 years) and, on the other hand, to allow the competitiveness of this fleet to be reflected in

the supply costs of the suppliers, and ultimately in the retail prices to end customers. But no

agreement could be reached between the State and the European Commission on a method

for calculating the ARENH price. The Commission’s decision approving the scheme has

effectively frozen the volume parameters (ceiling of 100 TWh

–

excluding the exceptional

measure of 20

TWh in the context of the “tariff cap” of 2022) and the price (€42/MWh) since

2012, without this price level ever being based on the production costs of the nuclear fleet.

However, the additional 20 TWh made available in 2022 were offered at a revalued price of

€46.2/MWh.

The ARENH price level set does not only apply to sales made by EDF, under ARENH,

to alternative suppliers. It indirectly values a share of the consumption of customers at the TRV

tariffs because of the way these tariffs are calculated (see

above

), and of EDF customers on

market offers, as EDF replicates the supply conditions of alternative suppliers in its offers. The

ARENH price therefore strongly determines the revenue that EDF can earn from its nuclear

electricity generation.

9

In comparison, the accounting costs of the historical nuclear generation fleet averaged

€40.5/MWh over the period 2011

-2021. They increased by about 35% between 2011

(€32/MWh) and 2019 (€43/MWh). The year 2020 was marked by a very strong increase in unit

production costs (which reached around €52/MWh)

, due to the drop in production caused by

the health crisis. 2021 has seen a recovery from 2020, but unit costs have nevertheless risen

by 8.5% compared to 2019.

On the basis of assumptions detailed in the report, the Court was able to assess the

overall revenues from nuclear generation and consider that they were approximately

€1.75

billion higher than the accounting costs of this generation, over the entire 2011-2021

period, ARENH capping having compensated for the absence of a price revision. However,

difficulties in covering costs arose between 2016 and 2018 due to the optional nature of the

ARENH, and since 2020 in particular, due to the drop in production volumes.

The Court also estimated that in the absence of ARENH, nuclear revenues over the

entire 2011-2021 period would probably have been higher: they would have exceeded the

accounting costs by about €7

billion over the period. The ARENH mechanism has thus limited

the revenues of the nuclear producer.

These results are the consequence of a combination of factors that are difficult to control,

even though they stem from regulation mechanisms: the arbitrage opportunities of alternative

suppliers (with or without recourse to ARENH) have weighed on EDF’s revenues during

periods of low market prices. Conversely, the capping of ARENH requests has had the effect

of supporting EDF’s revenues and compensating for the lack of ARENH price revisions during

periods of high market prices. Finally, the nuclear sector has benefited from capacity

remuneration depending on the level of ARENH capping (see below).

In response to the second evaluative question, the Court notes that although the ARENH

has limited the producer’s income and has allowed a redistribution of the benefits of the

competitiveness of the fleet, the estimated income of the historical nuclear sector has

exceeded its full costs over the period 2011-2021. However, the remuneration of this sector is

dependent on parameters that are difficult to control, including the effects of capping, which

does not guarantee coverage of costs by the ARENH mechanism.

The capacity mechanism is the source of financial transfers that may exceed the

needs of security of supply.

Introduced in 2016, the French capacity mechanism was designed to prevent certain

unprofitable production facilities that are useful for covering winter consumption peaks from

closing or being mothballed, and to encourage suppliers to develop their capacity to moderate

their customers’ consumption during these peaks (this is known as “curtailment” of

consumption). This mechanism is also intended to encourage increased availability of existing

assets during these particular periods and, if necessary, investment in new means.

The mechanism obliges suppliers to hold capacity guarantees based on the forecast

consumption of their customers during periods of tension between supply and demand. These

guarantees are acquired from producers at a price resulting from supply and demand at

organised auctions, which is then passed on to consumers. All French production capacities

are involved.

Feedback from RTE during 2021 shows that this mechanism has probably avoided some

gas plant closures, and has thus contributed to security of supply. However, its contribution to

the development of new production (or curtailment) capacities cannot be clearly established

because these new capacities are essentially the result of the set up of specific calls for

tenders, financially supported.

However, the scheme faces multiple constraints, some of which stem from the design

choices made when the scheme was approved by the European Commission. Two of these

10

constraints have a significant impact on the formation of the price of capacities: there are many

auctions for the same delivery year and a large part of the capacity guarantees are not valued.

Consequently, CRE considers that it is not in a position to monitor the formation of this price

under appropriate conditions.

Systematically, ARENH sales and sales of its equivalents within the TRVs or market

offers replicating the supply cond

itions of EDF’s competitors do not give rise to a specific

valuation under the capacity mechanism because the cost of the guarantee is directly included

in the price per kWh. This feature of the ARENH mechanism and its equivalents makes it

possible to limit the overall cost of acquisition of capacity guarantees by suppliers, which is

then passed on to consumers. This cost is nevertheless significant. Although the socio-

economic balance of the mechanism established by RTE is positive for the community as a

w

hole, the cost passed on to consumers has been estimated at between €500M and €1,200M

per year depending on the year.

However, some sectors already cover their full costs by selling their production, under

current price conditions on the energy market or thanks to specific public support mechanisms,

and do not need capacity remuneration to remain in operation. This is particularly the case for

subsidised renewable energies (wind and photovoltaic), the main hydroelectric concessions

and the historic nuclear fleet as a whole. Although limited by the existence of the ARENH

mechanism, the share of revenue from the scheme that goes to the nuclear industry is

nevertheless significant (€372 million in 2019 and €550 million for 2021 according to the

Court’s estimate

s).

Moreover, although the capacity mechanism encourages availability during periods of

tension, it has not been established that it has had a decisive role in this respect for the nuclear

industry: for example, capacity income was not decisive in EDF’s de

cisions to reschedule

maintenance shutdowns in the context of the Covid-19 pandemic.

These observations raise questions about the relevance of capacity remuneration for

nuclear power plants with regard to the security of supply objectives pursued by the capacity

mechanism. Moreover, this remuneration depends on several parameters, including the level

of ARENH capping, which has no connection with security of supply needs. This interference

disturbs the readability of the mechanism and hinders proper assessment of its efficiency.

In response to the third evaluative question, the Court therefore considers that the level

of revenue received by the various sectors, which is ultimately passed on to the end

consumers, is not always justified in view of security of supply needs.

The answers to the three questions examined in the evaluation show that the

results of the public intervention are not satisfactorily controlled. This observation

calls for clarification and prioritisation of the objectives pursued, in order to

determine the most appropriate methods of regulating the electricity markets.

More than ten years after the vote on the NOME law, the implementation of public

intervention in the French electricity markets no longer guarantees achievement of the initial

objectives.

However, the general organisation as initially envisaged by the NOME law seemed to be

able to meet the objectives it had set itself: mainly, to pass on to consumers the benefits of the

competitiveness of the nuclear generation fleet, while covering its financing needs and allowing

the development of competition. However, achieving this initial ambition presupposed the

implementation and management of regulatory and intervention tools that would preserve the

State’s and the regulator’s ability

to make the necessary trade-offs between objectives on a

documented and transparent basis, and to adapt the regulatory framework to changes in

context, for example with regard to the lifespan of the nuclear plant pool.

11

However, the ARENH price could never be set in accordance with the procedures laid down

by law. Keeping the ARENH ceiling at 100 TWh, despite the growth in the market share of

alternative suppliers and CRE’s proposals to raise it to 150

TWh, has led to an increase in the

exposure of the TRVs to market price increases, thus impacting the objective of retail price stability.

Keeping this ceiling has, moreover, in recent years, compensated for the absence of a revision of

the ARENH price and supported the financing of the nuclear plant pool, in the same way as the

remuneration of nuclear capacities (excluding ARENH or equivalent). The measures put in place

seem to have reached their limit with the adoption in the Initial Budget Act for 2022 of the

exceptional measures of the tariff cap, aimed at avoiding an increase of almost 35% in the level of

the TRVs inclusive of taxes. All in all, the organisation is no longer readable or controllable.

Moreover, the nuclear generation of the historical plant pool has retained its predominant

place in the

supply of French customers’ consumption, which leaves the question of its

regulation unresolved.

Summary of the effects of the implementation of the NOME law with regard

to the objectives

Source: Court of Accounts

In fact, it is now essential that all public intervention in the electricity markets be made

consistent. The discussions undertaken by the public authorities are based in particular on the

recent reports by CRE and the Competition Authority, which recommend that the existing systems

evolve, calling in particular for a clarification of their objectives. They should also take into account

the changing context of recent years, both in terms of the outlook for the electricity mix and the

electrification of uses, and in terms of European sector-specific legislation. The recent situation,

marked by a surge in gas prices spreading to electricity prices, sheds new light on the balance of

advantages and disadvantages of public intervention.

12

Depending on the objectives pursued and the effects sought, different organisational options

may be envisaged, subject to their compatibility with European legislation, depending in particular

on whether direct or indirect intervention on the volumes and value of historical nuclear production

would be maintained. In any case, only the continuance of a form of regulation would make it

possible to aim for a retail price target that reflects the stability and relative competitiveness of the

historical nuclear generation fleet. In this respect, it should be noted that none of the French

stakeholders concerned by the functioning of the electricity sector are currently calling for the

cessation of all regulation in favour of market mechanisms alone.

The continuation of public intervention would require several points to be considered, in

order to better configure the tools.

The possible implementation of long-term regulation of historical nuclear production, as

envisaged by the Government, would notably require clarification of the scope of the

beneficiaries of the regulation, both in terms of customer category (households, businesses)

and geographical jurisdiction (keeping the focus on customers established in France), and

justification for possible integration of the production of the Flamanville EPR. Furthermore, the

possible mandatory nature of nuclear regulation would imply that its link with the financing of

renewable electricity production capacities should be specified.

Above all, it should be ensured that regulation maintains incentives for the performance

of the plant fleet by setting a target production volume. Furthermore, fair access to this

resource for all suppliers would justify an accounting separation of EDF’s nuclear generation

and marketing activities. In any case, the adoption of a transparent and evolving method for

setting the regulatory tariff, adaptable to the prospects of extending the life of reactors, would

be necessary, so that the State and the regulator retain the capacity for objective assessment

and steering of the implementation of regulation, which has not been possible for the ARENH

mechanism.

Moreover, a new regulation taking over from the ARENH mechanism would also lead to

a more fundamental reconsideration of the scope and design of the system that would take

over from the capacity mechanism from 2027. The two systems should be linked from the

outset in order to ensure proportionate remuneration of the means that contribute to security

of supply.

Finally, as regards the retail market, depending on the main options selected, and in view

of the 2019 Directive, it seems prudent to now study what the consequences of a further

reduction in the scope of regulated tariffs would be, in order, if necessary, to anticipate them

and prevent damage to consumers.

In short, the current evaluation work demonstrates the need for the revisions of these

various tools to be coordinated in terms of both content and timetable, and for the

corresponding issues to be taken on board by all those concerned.

In terms of timetable, the expiry of the European authorisations for the ARENH

mechanism at the end of 2025 and the capacity mechanism at the end of 2026, as well as the

prospect of a new report evaluating the TRVs to be submitted to the European Commission in

2025, mean that the public authorities will need to have defined the new configuration of public

intervention tools on the electricity markets by the end of 2023.

The second half of 2022 should therefore be used by the State and the regulator to draw

up proposals for the development of the mechanisms, while also taking into account the

particular context created by the surge in gas prices.

The sharp rise in wholesale prices has already led the French authorities, but also other

Member States and the European Commission, to question the current functioning of the

electricity market and its ability to withstand such price increases without adverse

consequences for the rest of the economy. The current context thus seems to favour the

search for ways of organising markets to protect consumers against excessively volatile prices

that are far removed from the fundamentals of national production costs.

13

Finally, beyond regulation of the current power fleet, future public interventions in the

organisation of the electricity markets will have to be assessed in the light of the issues involved

in the financing of future production capacities.

14

Recommendations

1.

Make public the parameters for calculating the costs of electricity generation used to verify

that they are covered by the regulated tariffs (CRE, 2022).

2.

Redefine the method for calculating the regulated tariff component linked to ARENH

capping by extending the reference period

(CRE, 2022)

.

3.

Strengthen the guarantees required from active suppliers regarding their financial

capacities and risk coverage policy, in order to secure continuity of service at an affordable

price

(Ministry of Energy Transition, 2022)

.

4.

Clearly define each objective and associate a primary instrument of public intervention on

the electricity markets with it, while ensuring the overall coherence of regulation

(Ministry

of Energy Transition, 2023)

.

5.

With regard to Article 5 of Directive 2019/944 of the European Parliament and of the

Council, conduct an impact study on the consequences and conditions of implementation

of a possible reduction in the scope of regulated electricity tariffs

(Ministry of Energy

Transition, 2023)

.

6.

In a scenario of permanent regulation of the production of the existing nuclear fleet based

on the coverage of production costs

(Ministry of Energy Transition, 2023)

:

•

adopt a transparent and dynamic method for setting the regulatory tariff by making

the rate of return on capital explicit and taking into account the extended lifespan of

reactors;

•

encourage maximisation of the availability of the nuclear fleet;

•

prepare the accounting separation of EDF’s nuclear generation activities from its

marketing activities.

7.

Revise the capacity mechanism so that it ensures a remuneration of production means

proportionate to the strict need for security of supply, taking into account the regulation of

nuclear power (Ministry of Energy Transition, RTE, 2023).