EDF slammed by Tartam tariff pricing

The French government's implementation of regulated energy prices has hammered its state-owned champion's 2008 results and undermined market liberalisation. Roderick Bruce reports

French utility EDF has announced that it is to sell off assets and attempt to cut debt after its 2008 earnings declined 39% to EUR3.4 billion. A key factor in the decline in earnings was the increased costs associated with the Tarif Reglemente Transitoire d'Ajustement du Marche (Tartam), which cost 85% state-owned EDF EUR783 million after tax.

The French government implemented Tartam after strong lobbying from consumers who switched way from EDF's regulated prices to market-derived deregulated prices. Tartam states the price of deregulated electricity cannot exceed the tariff price by more than 23%, for two years from January 2007, though it has now been extended to 2010. Tartam has a double impact on EDF, in that EDF loses income by having to charge non-market rates, and it also has to pay into the fund that subsidises the tariffs.

The French government has been unwilling to fully liberalise the retail markets due to pressure from industry, and the European Commission is now pursuing a state aid case against it for subsidising the tariffs - and consumers - through the medium of EDF. It is also pursing an action for infringement of the liberalising EU Electricity Directive.

However, in November 2008 the French government launched its own review into Tartam, through a committee led by parliamentarian Paul Champsaur. Lobbying in favour of Tartam remains strong, as although the fall in wholesale prices has reduced the total money at risk for companies forced back to market rates, the recession has strengthened companies' resolve to hang on to a protected price.

Though no final recommendations have been made by the committee, two solutions are rumoured: either 50% of consumers' bills being at regulated rates and the second 50% at market rates, or the regulated rate applied to baseload power and market rate to peak load.

"Whichever way you look at it, such solutions are fraught with complication and could still fall foul of EU law," says Peter Styles, chairman of the electricity committee at the European Federation of Energy Traders (EFET).

The extension of Tartam has angered EFET, whose representatives have testified to the Champsaur Committee. EFET has also spoken privately to the French government and to the European Commission.

Styles says that many actual or potential new entrants to both the wholesale and retail power markets in France have been discouraged by the tariff.

"The electricity market was actually getting quite well established before the implementation of Tartam," he says. "The drop in wholesale volumes in 2007 was largely due to its introduction."