Electricity regulation in France: overview

A Q&A guide to electricity regulation in France.

The Q&A gives a high level overview of the domestic electricity market, including domestic electricity companies, electricity generation and renewable energy, transmission, distribution, supply and tax issues. It covers the regulatory structure; foreign ownership; import of electricity; authorisation and operating requirements; trading between generators and suppliers; rates and conditions of sale and proposals for reform.

To compare answers across multiple jurisdictions, visit the energy and natural resources Electricity regulation Country Q&A tool.

This Q&A is part of the global guide to energy and natural resources. For a full list of content visit www.practicallaw.com/energy-guide.

Contents

Overview

Electricity market

1. What is the role of the electricity market in your jurisdiction?

Overview

The French electricity market has been fully open to competition since 1 July 2007. The purposes of opening up the market were to:

  • Achieve an internal energy market that provides a secure energy supply at affordable prices for all consumers.

  • Encourage healthy competition on the European energy market.

  • Have due regard to matters of environmental safety.

The structure of the French electricity market was considerably altered by the implementation of the following three EU Energy Packages:

  • Directive 96/92/EC concerning common rules for the internal market in electricity. This first Energy Package promoted the independence of transmission system operators, and laid down the rules relating to the organisation, functioning of, and access to, the wholesale electricity market.

  • Directive 2003/54/EC concerning common rules for the internal market in electricity and repealing Directive 96/92/EC. This second Energy Package further opened the energy market. It mainly focused on the concepts of unbundling and third-party access, defining the need for an independent regulatory authority and additional measures to protect vulnerable customers. France transposed this second Energy Package into French law in 2004 (see Question 2), with the aim to open the market to all consumers by 1 July 2007.

  • Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing directive 2003/54/EC. This third Energy Package introduced the principle of full ownership unbundling, which is the separation of transmission interests (ownership and operation of transmission systems) from generation, production and supply activities.

These three Energy Packages were implemented through several French laws (see Question 2). However, the traditional French electricity model did not really fit with the proposed model of full ownership unbundling. This led the EU to introduce two other options for transmission operators (see Question 3, Unbundling requirements).

Recent trends

Recent trends have been influenced by the "Grenelle de l'Environnement", an environmental reform process launched in 2007, which was led by the French Government, local authorities and NGOs, in order to formulate proposals to fight global warming.

Grenelle I Law 2009. This law led to the adoption of a legal framework to:

  • Fight and adapt to climate change.

  • Preserve biodiversity.

  • Contribute to an environment that respects health.

To this end, public and private organisations were asked to frame a sustainable development plan. Each year, state services and public organisations must present and demonstrate their efforts to comply with the Grenelle I legal framework.

Grenelle II Law 2010. This law introduced reforms in the following areas:

  • Housing and urban environment. The law strengthened mechanisms to improve the energy performance of buildings.

  • Transport. The law encouraged the development of sustainable means of transport to reduce their impact on the environment.

  • Energy. The law created a regional climate, air quality and energy plan, introduced a carbon balance and a new regime for the installation of wind farms.

  • Environmental health and waste management. The law strengthened protective mechanisms to deal with noise and light pollution, making it compulsory to make waste management plans before the demolition of a building.

The Energy Transition Act (Loi relative à la transition énergétique pour la croissance verte), promulgated on 17 August 2015, sets out key objectives for a new French energy model in a global and European context in the aftermath of the Grenelle de l'Environnement (see Question 24).

Regulatory structure

2. What is the regulatory framework for the electricity sector?

Regulatory framework

The French regulatory framework is made up of various laws, which were adopted in the wake of the EU legislative packages (see Question 1, Overview).

Electricity Act 2000 (Loi du 10 février 2000 relative à la modernisation et au développement du service public de l'électricité). This Act transposed the first EU Energy Package, providing a basis for the opening up of the electricity market through:

  • Reinforcing the importance of the electricity public service by focusing on the three following objectives:

    • balanced development of electricity supply;

    • development and operation of public transmission and distribution networks; and

    • supply of electricity throughout the French territory.

  • Establishing the obligation to purchase electricity from renewable sources and cogeneration at fixed feed-in tariffs.

  • Introducing the contribution to the public electricity service (see Question 23).

  • Creating the Energy Regulatory Commission (Commission de régulation de l'énergie) (CRE), and a standing committee for disputes and sanctions.

Electricity Act 2010 (Loi NOME du 7 décembre 2010). The implementation of this Act, which transposed the third EU Energy Package, created the conditions for a genuine opening up of the electricity market to competition through:

  • Creating a temporary mechanism for regulated access to historical nuclear energy. It required EDF to sell almost a quarter of its nuclear output to competition at a price set by decree for a period of 25 years.

  • Allowing changes to regulated tariffs. These tariffs were intended to disappear gradually for certain categories of professional consumers (see Question 22).

  • Establishing a capacity market. To secure electricity supply in France, electricity suppliers must buy peak load generation capacity certificates to match their forecast needs three years in advance. These certificates are delivered to the operators of generation plants.

Other key laws. Other key laws that regulate or affect the electricity sector include the:

  • Utilities Act 2004. This Act transposed the second EU Energy Package and therefore established the legal requirement to unbundle transmission from generation and supply activities. It also transformed EDF and GDF, which were previously public bodies, into public limited companies in which the French Government currently holds more than 70% of the share capital.

  • Energy Act 2005. This Act mainly sets out measures for the safety of supply, energy efficiency measures, and guarantees competitive energy prices.

  • Energy Act 2006. This Act increased the CRE's responsibilities and reduced the state's ownership of GDF to allow its potential merger with Suez.

  • Energy Transition Act 2015. This Act sets several objectives with the aim of developing a new French energy model (see Questions 1 and 24).

Legal Codes. Codes regulating the electricity sector include the:

  • French Energy Code. This Code was created in 2011 with the clear objective of bringing together the various oil, gas and electricity legal provisions into one piece of legislation, therefore giving a clearer overview of the French electricity legislation currently in force.

  • French Environmental Code. This Code contains provisions that contribute to the regulatory framework for the electricity sector (for example, this Code sets out the objectives of the national energy policy).

Regulatory authorities

CRE. Created in 2000, the CRE is the main regulatory authority dedicated to the energy sector in France. Its role is to ensure the proper operation of the electricity and gas markets, in accordance with the energy policy's objectives and for the benefit of final consumers.

The CRE has a wide range of responsibilities, including (Energy Code):

  • Ensuring access to the public electricity grid.

  • Ensuring the proper operation and development of the electricity grid and infrastructure.

  • Ensuring the independence of network operators.

  • Contributing to the development of the European electricity and gas markets.

  • Contributing to the implementation of various policies to support electricity supply and generation.

General Directorate for Competition Policy, Consumer Affairs and Fraud Control (Direction générale de la concurrence, de la consommation et de la répression des fraudes) (DGCCRF). The DGCCRF regulates all relevant energy stakeholders and adopts measures to guarantee the:

  • Conditions for a balanced and transparent operation of the markets.

  • Provision of reliable information to consumers in order to improve their confidence in purchasing energy.

  • Preservation of consumers' health and physical safety.

National Energy Mediator (Médiateur national de l'énergie) (MNE). The MNE acts as an out-of-court intermediary in the settlement of disputes arising out of the performance of contracts entered into by consumers and energy companies. The MNE also plays a key role in informing consumers about their rights in the energy sector.

See box, The regulatory authorities.

 

Electricity companies

Main companies

3. What are the main companies involved in electricity generation, transmission, distribution and supply?

The French electricity market is composed of four main activities: generation, transmission, distribution and supply. Before 2000, these four activities were carried out by EDF, which operated as a monopoly. Since then, generation and supply have been opened to competition. Transmission and distribution remain monopolistic activities, which are now regulated by the Energy Regulatory Commission (Commission de régulation de l'énergie) (CRE).

Generation

Although the generation sector has been entirely opened to competition since 2007, the number of generating companies in France has not grown substantially. Currently, the three companies involved in generation in France are:

  • EDF.

  • Compagnie Nationale du Rhône (CNR).

  • Endessa France.

EDF still generates almost 90% of France's electricity. This can partly be explained by French history, and the fact that in 1946, the French Government granted EDF a monopoly for electricity generation, transmission and distribution. The liberalisation of the energy sector under EU law put an end to this national monopoly, and gradually compelled EDF to reduce its market share.

Transmission

Réseau de transport d'électricité (RTE), a subsidiary of EDF created in 2000, is the electricity transmission system operator for France. Its public service mission is to ensure fair access to the electricity network for all participants in the electricity market.

Distribution

Enedis (previously known as ERDF) is the main distribution network operator for France. It is the distribution operator for almost 95% of the French territory. The remaining 5% is managed by local distribution companies (see Question 18).

Enedis is a public limited company created in 2008, and is also a subsidiary of EDF.

Supply

EDF is no longer the only electricity supplier in France. Since 2007, all consumers have been able to choose their electricity supplier freely (see Question 22).

The main supply companies in France are:

  • EDF.

  • Alterna.

  • Direct Energie.

  • Enercoop.

  • Energem.

  • Engie.

  • Lampiris.

  • Planète Oui.

  • Sélia.

  • Energies du Santerre.

  • Lucia.

  • Proxelia.

Unbundling requirements

The third EU Energy Package introduced the principle of full ownership unbundling (that is, the separation of transmission interests from generation, production and supply activities). The key requirement is that the transmission system operator (TSO) must be certified as having complied with the principle of ownership unbundling.

However, given the challenges posed by the implementation of this system in some European countries where the TSO is vertically integrated (including France), the EU introduced the following two other options:

  • The independent system operator (ISO).

  • The independent transmission operator (ITO).

France adopted the ITO model, which contains less unbundling requirements than the other options. Under the ITO model, a parent company's affiliate can act as transmission operator if it is certified as being compliant with certain requirements that ensure its independence within its vertically integrated activities. These requirements include the following:

  • The ITO must not have any direct or indirect share ownership in a subsidiary of its parent company.

  • The management of the ITO and all related decisions must be made independently and without the interference of the parent company.

  • The ITO must create separate accounts.

  • The ITO must submit annual reports to the CRE showing that it is implementing the compliance programmes. To this end, a compliance officer is responsible for ensuring that the requirements regarding independence from the parent company are met.

The French transmission operator, RTE, which is vertically integrated into EDF, is directly affected by the requirements described above. Although it is considered to be sufficiently developed and independent to be able to meet the aims of the third EU Energy Package, further efforts are needed to comply fully with it. Accordingly, an Ordinance was issued on 10 February 2016 to transpose the third Energy Package fully (see Question 24).

Foreign ownership

4. Are there any restrictions concerning the foreign ownership of electricity companies or assets?

A foreign investor must obtain the approval of the Minister in charge of the Economy when it acquires either (French Monetary and Financial Code):

  • Control of assets used for the supply of electricity.

  • More than 33% of the share capital of an electricity supply company.

An additional certification process is required in the case of foreign ownership or control of a transmission operator (Energy Code). The Minister of Energy can refuse certification if foreign ownership or control puts the security of electricity supply at risk.

Import of electricity

5. To what extent is electricity imported?

International electricity exchanges occur through 48 interconnections between France and neighbouring countries. With 120.9 terrawatt-hours (TWh) exchanged in 2015, imports and exports of electricity reached their highest level for the last ten years.

France is a leading exporter of electricity, with 91.5 TWh of electricity exported in 2015. In 2015, France imported 29.4 TWh of electricity from Great Britain, Switzerland, Italy, Spain and Central Europe. The low level of electricity imported into the French territory can be explained by the following reasons:

  • France has the world's second largest nuclear power park.

  • The current development of renewable energy increased the volume of electricity generated.

 

Electricity generation and renewable energy

Sources of electricity generation

6. What are the main sources of electricity generation?

Fossil fuels

In 2015, fossil fuels accounted for 6.2% of electricity generation, as follows:

  • Coal: 1.6% (8.6 TWh).

  • Fuel: 0.6% (3.4 TWh).

  • Gas: 4% (22.1 TWh).

Nuclear fission

In 2015, nuclear fission accounted for 74.6% of electricity generation.

Renewable energy

In 2015, renewable energy accounted for 19.2% of electricity generation, as follows:

  • Hydroelectricity: 12.9% (61.2 TWh).

  • Wind: 3.7% (17.7 TWh).

  • Solar: 1.4% (6.7 TWh).

  • Biomass: 1.2% (5.6 TWh).

 
7. Are there any government policies, targets or incentives in place to encourage the use of renewable or low carbon energy?

Government policies/incentives

Several mechanisms have been developed to encourage the use of renewable energy, including the following:

  • Feed-in tariffs (FiT). This scheme is financed by the contribution to the electricity public service, which is added to the electricity bill of each French electricity consumer (see Question 23). It provides security for investors by guaranteeing long-term revenues based on the amount of renewable energy produced. The scheme includes:

    • the obligation to purchase (obligation d'achat). EDF and local distribution companies (LDCs) must enter into power purchase agreements with facilities designated under the Energy Code. The obligation to purchase scheme provides support for energy from wind power, solar power, hydro power, biomass and geothermal sources, among other technologies; and

    • an additional remuneration (complément de rémunération). In the wake of France's energy transition, a new mechanism has been set up: if requested, electricity producers can enter into a contract with EDF to benefit from an additional remuneration, as a complement to the sale of their electricity on the market. Only facilities designated under the Energy Code can benefit from this additional remuneration.

  • Tender system. This is used for large renewable energy projects (for example, large scale offshore wind power, solar power, biomass, hydro and other projects). For example, the tender system was used on two occasions to foster the development of offshore wind projects. In 2012, two consortiums were awarded four projects totalling 1.5 GW. In 2014, another consortium was selected to construct two projects with a combined capacity of 1 GW.

There are also tax incentives, such as:

  • Tax credits. Taxpayers can benefit from a tax credit for expenses in certain circumstances.

  • Reduced rate of VAT. The 20% VAT rate is reduced to 5.5% to help with energy upgrades of residential premises.

  • Interest-free eco-loan. This offers very advantageous terms for financing energy-saving works to make homes more energy efficient.

  • Property tax exemption. Taxpayers can benefit from a tax exemption for up to 20 years if their property meets specific environmental requirements.

Renewable energy targets

Under Directive 2009/28/EC on the promotion of the use of energy from renewable sources, France committed to derive 23% of its energy consumption from renewable sources by 2020. Under the Energy Transition Act 2015, France committed to derive 32% of its energy consumption from renewable sources by 2030.

However, there are no legal sanctions if these targets are not met.

See table, Common forms of renewable energy ( www.practicallaw.com/2-524-3139) .

 
8. What are the main obstacles to the development of renewable energy?

Supremacy of the nuclear sector

Nuclear energy is one of the main obstacles to the development of renewable energy in France. The French energy policy that has been in place since the 1960s has led to the construction of the nuclear power plants currently in existence, which has prevented the expansion of alternative means of electricity production.

The development of renewable energy will now depend on how many of the existing nuclear power plants will be decommissioned or extended.

Length of the administrative process

Another ongoing obstacle has been the complexity and length of the legal administrative process in France. However, to address this problem, the Energy Transition Act 2015 sets out a simplified authorisation process for the construction of wind, solar or hydraulic projects, which may considerably reduce the time frame required for the completion of these projects in the future.

 
9. Are there any plans to build new nuclear power stations?

France has 19 nuclear power plants, with a total of 58 reactors. There are currently no plans to build new plants. However, there are several related projects underway, including the following:

  • France is planning to develop new models of third-generation European pressurised reactors in the 2030s.

  • France is currently taking part in the international experimental fusion reactor project (ITER), which is one of the most ambitious energy projects in the world. The ITER members, which include China, the EU, India, Japan, South Korea, Russia and the US, are now engaged in a 35-year alliance to build and operate the ITER experimental device, and together develop fusion technology to the point where a demonstration fusion reactor can be designed.

Authorisation and operating requirements

10. What are the authorisation requirements to construct electricity generation plants?

The construction of electricity generation plants may require authorisation, in the form of a prior declaration to (déclaration préalable), or a building permit (permis de construire) from the relevant local authority (Urban Planning Code).

In addition, certain types of energy infrastructure (for example, wind farms) are defined as installations classified for the protection of the environment (ICPE), which are subject to specific authorisation, declaration or registration procedures due to their potentially harmful effects on the environment (Environmental Code).

The construction of new electricity generation plants is also subject to certain requirements, such as (Energy Code):

  • Compliance with general specifications.

  • Provision of an impact study and a risk study.

However, some facilities are exempt from these formalities because of their limited importance, unless they are located in a protected area.

Specific rules apply to the creation of facilities involving radioactive substances (such as nuclear power plants). A public inquiry must take place and the Nuclear Safety Authority (Autorité de Sûreté Nucléaire) must give its approval before authorisation is issued by decree. Additionally, the operator must demonstrate that any risks have been evaluated, mitigated and managed in order to protect public interests (that is, public health, safety and hygiene) and the environment.

 
11. Are there any requirements to ensure new power stations are ready for carbon capture and storage (CCS) technology, or require a plant to retrofit CCS technology once this is ready?

CCS technology is governed by Directive 2009/31/EC on the geological storage of carbon dioxide (CCS Directive). The CCS Directive was implemented in France through modifications of the Environmental Code and Mining Code by the:

  • Decree on the Geological Storage of Carbon Dioxide of 31 October 2011.

  • Law on National Commitment to the Environment of 12 July 2010.

CCS technology is one of the tools of France's battle against global warming, although projects implementing this technology are only emerging in France (for example, the advanced amine process). However, there are no specific requirements to ensure that new power stations are ready for CCS technology. Currently, the Environmental and Mining Codes only set out a framework for obtaining a CCS permit.

 
12. What are the authorisation and main ongoing requirements to operate electricity generation plants?

Operators must apply to the Minister of Energy for authorisation to operate electricity generation plants with an installed capacity exceeding a specific threshold (Energy Code). Facilities with a capacity below this threshold are deemed authorised.

In addition, facilities involving radioactive substances are subject to prior authorisation of the Nuclear Safety Authority (see Question 10). These facilities must be subject to regular safety monitoring, and specific restrictions may be imposed in circumstances where the generation plant gives rise to potential risks. The Minister of Energy has coercive powers to require operators to take all necessary precautions when necessary (for example, in the face of serious and immediate danger). Authorisation can be suspended at any time and, if necessary, the Minister of Energy can order the permanent closure and dismantling of the facility.

 
13. What requirements are there concerning connection of generation to the transmission grid?

The connection of generation to the transmission grid is regulated by:

  • The Energy Code.

  • Two Ministerial Orders of 23 April 2008, which set out specific requirements for connection to the grid.

Before connecting a new generator to the transmission or distribution system, the producer must submit a technical study to the network operator, which details the technical characteristics of its electricity generator taking into account the technical requirements under the Ministerial Orders above, in order to ensure that its generator does not affect the safety and security of the grid.

The network operator must then provide the producer with a connection plan, which can include details of technical adjustments to be made to the facility in order to connect it to the grid. After the producer accepts this plan, the network operator and the producer enter into a connection agreement and an operation agreement.

These requirements apply to:

  • Every operation involving the connection of new generators and consumers to public electricity grids.

  • Adjustments made to network facilities already connected to these grids (for example, in the event of substantial modifications).

However, electricity consumption installations of less than 36 kVA and production facilities in non-interconnected areas with an output of less than 20 MW are excluded from the scope of the provisions above.

 

Electricity transmission

Authorisation and operating requirements

14. What are the authorisation requirements to construct electricity transmission networks?

Under the Urban Planning Code, the construction of electric transmission lines with a voltage lower than 63 kilovolts (kV) requires a prior declaration (déclaration préalable) to the local authority. Transmission lines exceeding this threshold require a building permit (permis de construire) from the prefect.

The following additional requirements apply (Energy Code):

  • Approval from the prefect is required before transmission lines can be installed if the maximum voltage exceeds 50 kV. The application must include:

    • a short concept note describing, in general terms, the principal elements of the project;

    • a map showing the route of the pipeline and the location of the works;

    • a risk study;

    • all documents showing that the projected transmission line complies with applicable technical regulations.

A copy of this application is transmitted for information to the relevant mayors and stakeholders.

  • Approval from stakeholders and mayors of the municipalities affected by the project is required before transmission lines can be installed if the maximum voltage is lower than 50 kV. The application must include the same information and documents as above, except for the risk study.

The need to gain access to the land affected by the project may also require the entity wishing to construct the electric transmission line to seek specific authorisations to occupy that land (for example, easements).

 
15. What are the authorisation and main ongoing requirements to operate electricity transmission networks?

To operate electricity transmission networks, operators must obtain certification from the Energy Regulatory Commission, which verifies that the company complies with its obligations under the unbundling requirements (Energy Code). This certification is held by Réseau de transport d'électricité (RTE) under a concession agreement. No other company currently operates transmission lines on the French territory.

Transmission charges

16. How are the charges and conditions for the transmission of electricity regulated?

Charges payable

The public electricity network user tariffs (Tarifs d'utilisation du réseau public d'électricité) (TURPE) are paid by all network users. They cover the use of both the electricity transmission and distribution networks, and are calculated so that the network operator's revenues cover all expenses incurred for the operation, development and maintenance of the transmission network.

The TURPE allow transparent and non-discriminatory access to public networks and undistorted competition between electricity suppliers, and ensure:

  • Identical tariffs regardless of the distance travelled by electricity.

  • Identical tariffs throughout the French territory.

  • Coverage of all costs incurred by the network operator.

Price control

The method used to establish the rates of the TURPE is set up by the Energy Regulatory Commission (Commission de régulation de l'énergie) (CRE) and published in the Official Journal. The formula used to calculate the TURPE is reassessed every four years, but the prices are reviewed annually by the CRE. The latest rates (TURPE 4) entered into force in 2014.

 

Electricity distribution

Authorisation and operating requirements

17. What are the authorisation requirements to construct electricity distribution systems?

The requirements for the construction of electricity distribution networks are the same as those applicable to the construction of electricity transmission networks (see Question 14).

 
18. What are the authorisation and the main ongoing requirements to operate electricity distribution systems?

Enedis is the main distribution network operator for France. It is the operator for almost 95% of the French territory, while the remaining 5% is managed by local distribution companies (LDCs).

The public electricity distribution system is owned by municipalities or groups of municipalities, which usually delegate the management of the system to Enedis or LDCs under concession agreements.

In addition, the operation of electricity distribution systems must be carried out so as to ensure the proper functioning, performance and safety of the network (Energy Code).

Distribution charges

19. How are the charges and conditions for the distribution of electricity regulated?

The public electricity network user tariffs (Tarifs d'utilisation du réseau public d'électricité) (TURPE) cover the use of both the electricity transmission and distribution networks (see Question 16).

 

Electricity supply

Authorisation and operating requirements

20. What are the authorisation and the main ongoing requirements to supply electricity to end consumers?

Suppliers must apply to the Minister of Energy for authorisation to purchase electricity for resale to eligible customers (Energy Code). Applications are assessed based on the following factors:

  • The technical, economical and financial capabilities of the applicant.

  • The compatibility of the planned project with the obligations incumbent on electricity suppliers (for example, the obligation to contribute to the security of electricity supply).

Trading between generators and suppliers

21. How is electricity trading (between generators and suppliers) regulated?

The wholesale market refers to the market on which electricity is traded (bought and sold) before being delivered via the network to end customers (individuals or companies). Exchanges can be carried out on the stock market (that is, on the European Power Exchange EPEX SPOT France or EEX Power Derivatives France), via a stockbroker or directly over-the-counter (through a bilateral contract). The Energy Code sets out the rules on the marketing of electricity.

The Energy Regulatory Commission (Commission de régulation de l'énergie) (CRE) monitors the French wholesale electricity market. It ensures that the conditions for access to the market do not hinder free competition. The CRE is responsible for overseeing operations relating to:

  • Transactions performed by a producer, broker or supplier.

  • Offers made on the market.

  • Technical and financial constraints that influence offers and transactions.

The CRE also monitors cross-border transactions, where only part of the transaction is carried out within the French electricity market.

Trading between generators and suppliers is monitored by the CRE, in co-ordination with the Financial Markets Authority (Autorité des Marchés Financiers) and Competition Authority (Autorité de la Concurrence).

Electricity price and conditions of sale

22. How is the price for electricity and conditions of sale regulated at the consumer and wholesale level?

Consumer

Since the opening up of the French energy market to competition on 1 July 2007, new entrants can supply electricity alongside historical suppliers (that is, EDF and local distribution companies). There are currently two pricing mechanisms available:

  • Non-regulated tariffs. Agreements are concluded between consumers and suppliers, and the tariffs are freely determined in accordance with the market price.

  • Regulated tariffs. Agreements are concluded between consumers and the historical suppliers at regulated prices set by the French Government, based on proposals made by the Energy Regulatory Commission (Commission de régulation de l'énergie) (CRE).

Since 2016, regulated tariffs have been abolished for consumers whose subscribed power is higher than 36 kVA (green and yellow tariffs), in order to comply with EU law. They have been maintained for individuals and small businesses (blue tariffs).

Wholesale

The Energy Code currently provides that:

  • Wholesale electricity prices are not regulated, but determined by the market.

  • The CRE must monitor the French wholesale electricity market.

However, new suppliers can buy nuclear electricity produced by the historical operator EDF at a regulated price (Accès régulé à l'électricité nucléaire historique) (ARENH), and at a volume set by a Government Order after having obtained the CRE's opinion (Electricity Act 2010). This system was recently challenged by the Competition Authority (Autorité de la Concurrence) over concerns that no measures were planned for exiting the ARENH mechanism. The Competition Authority therefore requested the French Government to provide its comments on this issue at the earliest opportunity.

 

Tax issues

23. What are the main tax issues arising concerning electricity generation, distribution, transmission and supply?

The taxation of electricity is highly regulated by EU law, in particular through Directive 2003/96/EC restructuring the Community framework for the taxation of energy products and electricity, which has been incorporated into French Law.

The main taxes arising in relation to electricity generation, distribution, transmission and supply are as follows:

  • Transmission tariff contribution (Contribution tarifaire d'acheminement) (CTA). This tax finances specific rights to pension plans for employees of the electricity and gas industries.

  • Contribution to the electricity public service (Contribution aux charges de service public de l'électricité) (CSPE). The CSPE is a tax paid by all end users to finance the costs of the electricity public service. Since early 2016, the CSPE has been part of the domestic tax levied on the final consumption of electricity (Taxe intérieure sur la consommation finale d'électricité).

  • Taxes on the final consumption of electricity (Taxes sur la consommation finale d'électricité) (TCFE). The TCFE were established by the Electricity Act 2010 to replace the old local taxes levied on electricity. The amount of TCFE is specific to each municipality and department, and depends on the amount of power subscribed.

  • Value added tax (Taxe sur la valeur ajoutée) (VAT). Different rates apply depending on the particular item of the consumer's invoice, as follows (Tax Code):

    • the reduced 5.5% VAT rate applies on the subscription fee and the CTA; and

    • the normal 20% VAT rate applies on the consumption of electricity, the CSPE and the TCFE.

 

Reform

24. What reform proposals are there for the regulation of the electricity sector?

The Energy Transition Act 2015 sets out key objectives for a new French energy model in a global and European context in the aftermath of the Grenelle de l'Environnement (see Question 1, Recent trends). In this regard, the Energy Transition Act 2015 sets out the following six ambitious objectives to be achieved in line with EU commitments:

  • Halve the nuclear share of electricity generation by 2025.

  • Reduce greenhouse gas emissions in order to meet the European goal of a 40% decrease (compared to the 1990 baseline) by 2030.

  • Halve France's final energy consumption by 2050.

  • Increase the share of renewable energy in global energy consumption up to 32% by 2030, and up to 40% in electricity production.

  • Reduce France's fossil fuel consumption by 30% by 2030.

  • Reduce the amount of landfill waste by 50% by 2025.

The purpose of this transition is to update the French energy model and tackle climate change, as well as to create local jobs and improve general wellbeing. To this end, the Act sets seven priorities:

  • Renovating existing buildings to save energy.

  • Developing clean transportation.

  • Combatting wastage and fostering circular economy.

  • Developing renewable energy, in particular at a local level, to create a balanced energy mix.

  • Improving nuclear safety and public information.

  • Simplifying and clarifying procedures to increase efficiency and competitiveness.

  • Renewing territorial governance tools.

The Ordinance on the Internal Market of Electricity and Gas of 10 February 2016 finalises the transposition of Directives 2009/72/EC and 2009/73/EC concerning common rules for the internal market in electricity and natural gas. The Ordinance aims to meet the demands of the European Commission, which referred to 11 items in relation to which the transposition of the Directives was incorrect or incomplete, and served a formal notice on the French Government requiring it to comply with its demands. The Ordinance contains provisions:

  • Relating to ownership unbundling.

  • On vertically integrated companies.

  • That increase the responsibilities of the Energy Regulatory Commission, which now include:

    • controlling investment plans of transmission system operators belonging to a vertically integrated company, and operators subject to the ownership unbundling model; and

    • overseeing the implementation of measures ordered by the Minister of Energy in times of crisis.

Finally, with the recent Paris climate conference (COP21), 195 countries adopted the first universal and legally binding global climate deal. In particular, governments agreed to minimise climate change by limiting global warming to less than 2°C. The agreement is due to enter into force in 2020.

With these recent improvements, France emerges as one of the most reliable countries in Europe for investors, a development which will be strengthened in the long term.

 

The regulatory authorities

Energy Regulatory Commission (Commission de Régulation de l'Énergie) (CRE)

Address. 15, rue Pasquier, 75008 Paris

T +33 1 44 50 41 00

W www.cre.fr

Main responsibilities. The CRE is the main energy regulator.

General Directorate for Competition Policy, Consumer Affairs and Fraud Control (Direction générale de la concurrence, de la consommation et de la répression des fraudes) (DGCCRF)

Address. 59, boulevard Vincent Auriol, 75013 Paris

T +33 1 44 87 17 17

W www.economie.gouv.fr/dgccrf

Main responsibilities. The DGCCRF is a Directorate of the Ministry of Economy in charge of controlling compliance with competition and consumer rules.

National Energy Mediator (Médiateur National de l'Energie) (MNE)

Address. 15, rue Pasquier, 75008 Paris

T +33 1 44 94 66 00

W www.energie-mediateur.fr

Main responsibilities. The MNE is an out-of-court intermediary for the settlement of disputes arising out of the execution of contracts with energy companies.



Online resources

Legifrance

W www.legifrance.gouv.fr or www.legifrance.gouv.fr/Traductions/en-English

Description. This website provides access to applicable legislation in France.

Développement durable

W www.developpement-durable.gouv.fr

Description. This website provides information on energy policies in France.

EDF

W www.edf.fr or https://particulier.edf.fr/fr/accueil/while-waiting-for-the-english-website.html

Description. This website provides more information about the historical operator EDF.

Réseau de transport d'électricité (RTE)

W www.rte-france.com or www.rte-france.com/en

Description. This website provides more information about the transmission network operator RTE.

Enedis

W www.enedis.fr or www.enedis.fr/English

Description. This website provides more information about the distribution network operator Enedis.



Contributor profiles

Stéphane Gasne, Partner, Projects

Pinsent Masons France LLP

T +33 1 53 53 09 89
M +33 6 35 52 14 16
E stephane.gasne@pinsentmasons.com
W www.pinsentmasons.com

Professional qualifications. France, Avocat à la Cour; England and Wales, Solicitor

Areas of practice. Construction; energy and infrastructure; project finance; concessions/PPP.

Cyrielle Barbier, Associate, Projects

Pinsent Masons France LLP

T +33 1 53 22 09 44
M +33 6 25 44 18 33
E cyrielle.barbier@pinsentmasons.com
W www.pinsentmasons.com

Professional qualifications. France, Avocat à la Cour

Areas of practice. Construction; energy and infrastructure; project finance; concessions/PPP.

Anaïs De Balorre, Trainee, Projects

Pinsent Masons France LLP

T +33 1 53 53 08 61
E anais.debalore@pinsentmasons.com
W www.pinsentmasons.com

Areas of practice. Construction; energy and infrastructure; project finance; concessions/PPP.


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