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French Government Considers Windfall Levy for Energy Price Control

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France is considering implementing measures to cap national electricity prices without violating EU subsidy regulations. One option being discussed is the introduction of a windfall levy on revenues generated by state-owned nuclear power producer EDF. This move, part of a broader overhaul of power price regulation in France, would involve setting a ceiling for EDF’s nuclear energy prices, with revenues above that threshold being distributed back to end users. France hopes to implement these measures without objections from the European Commission. However, the extent to which France can act unilaterally is uncertain, as EU member states and the commission are currently negotiating electricity market reforms.

President Emmanuel Macron’s pledge to “take back control” of electricity prices has raised concerns in Brussels, particularly given the ongoing negotiations for electricity market reform. Macron’s move reflects France’s frustrations with the treatment of its nuclear power sector and subsidies during these negotiations. While France seeks a European agreement on market reform, it is also prepared to act independently if necessary. The French government aims not only to control power prices but also to increase domestic energy production to avoid repeating the energy crisis that occurred last year.

The discussions on price mechanisms are partly driven by the impending expiration of the current framework, known as Arenh, which determines EDF’s fixed price for selling power to rival distributors. France will have to engage in discussions with its European partners to proceed with its plans. EDF’s CEO, Luc Rémont, is receptive to a price-ceiling solution, but conflicts with the government regarding the level at which it should be set add complexity to the government’s plans. The state wants to keep the price as close as possible to €61 per megawatt hour, while EDF argues for a higher price to support Macron’s plan of building new reactors.

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