French Government Announces Exceptional Measures, Changes to ARENH Mechanism

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Last Thursday, the French Government announced several significant changes concerning the country's domestic electricity market. These changes were designed to address and alleviate some of the impacts of the steep rise in electricity prices.

First, the Government announced that it was increasing the amount of electricity that EDF will be required under the law to sell other third-party suppliers (Accès Régulé à l'Electricité Nucléaire Historique - ARENH) from 100 TWh to 120 TWh. This additional 20 TWh allocation will be made available over the period from 1 April 2022 to 31 December 2022. The additional allotment will be priced at €46.2 per MWh, a 10 percent premium to the price of the main allotment of €42 per MWh. This represents a dramatic discount to the current market with current prices for the periods well over €160 per MWh. It is important to note that the original allotment of 100 TWh was oversubscribed by more than 60 TWh. Notably, the Government announcement did not provide details of how this change would be implemented in the markets.

EDF estimates that the negative impact on its financial results, using current pricing, will be in the range of €7 to €8 billion. Simultaneously with the Government announcement, EDF revised its nuclear output estimated for 2022 down from 330 – 360 TWh to 300 – 330 TWh. The output revisions resulted from the extension of the outages at five nuclear reactors, including Civaux 1, Civaux 2, Chooz 1, Chooz 2, and Penly, due to issues identified during preventive maintenance checks.

The second change made by the Government was the reduction of the electricity tax (Taxe intérieure sur la consommation finale d'électricité – TICFE - CSPE) from €22.5 per MWh to €0.50 per MWh with effect from 1 February 2022. The reduction will remain in place for one year at a budgetary cost to the French Government of €8 billion.

According to the Ministry of Ecological Transition, these measures will limit tariff increases to residential and "blue tariff" customers (business with demand equal to or less than 36 kVA), as well as professional customers located in non-interconnected zones to 4 percent. Without this intervention, the Ministry believes increases would have been as high as 35 percent.

NUS Consulting Group will be following these developments closely due to their material impact on French and European energy consumers. For businesses requiring advice and support with managing their ARENH electricity supply contracts, NUS's French team is available to assist with your requirements. Contact us for more information.

More: Research Notes, ARENH, CSPE, Electricity, TICFE

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Richard Soultanian