In 2020, this mechanism of compensation for public service charges will be funded as follows:

• the costs linked to the energy transition, which correspond to the subsidy mechanisms for renewable energies, and the reimbursement of the past accumulated shortfall in compensation borne by EDF as measured at 31 December 2015, are registered in a special “energy transition” budget item created by the amended finance law for 2015. Law no. 2016-1917 of 29 December 2016 (the finance law for 2017) stipulated that the two sources of additional funding for this special budget item would be a portion of the domestic tax on coal, lignite and coke (TICC), and a portion of the domestic tax on energy products (TICPE), the latter providing most of the funding. The finance law for 2020 replaces the percentages of the TICC and TICPE by a set amount, to avoid the uncertainties of forecast income from these taxes, and broadens the sources of funding for the “energy transition” budget item by including the proceeds of auctions of Guarantees of Origin as allowed by Article L. 314-14-1 of the Energy Code. The initial French finance law for 2020 also proposes to discontinue this “energy transition” budget item in 2021, with the costs concerned subsequently covered directly by the general budget;
• other public service charges excluding costs associated with the subsidy mechanisms for renewable energies (i.e. costs relating to fuel poverty, tariff equalisation in zones that are not connected to France’s mainland network, cogeneration, the budget for the energy ombudsman, etc.) are registered directly in the general budget;
• income generated by the domestic tax on the final consumption of electricity, now renamed the Compensation for Public Electricity Charges (CSPE) goes directly into the general budget. The CSPE tax is collected directly from final consumers of electricity in the form of an additional levy on the electricity sale price (and collected from electricity suppliers), or directly from electricity producers that produce electricity for their own uses.

The level of the CSPE tax was set in 2016 at a full rate of €22.5/MWh, and eight reduced rates ranging from €12/MWh to €0.5/MWh depending on criteria of electro-intensiveness, business category and the risk of carbon leakage from installations (the risk of industries relocating to countries where greenhouse gas emissions are higher due to their electricity mix). The level remains unchanged in 2020.

The amended finance law for 2019 applied a downward adjustment to the amounts of compensation payable by the State for public service charges borne in 2019, which had decreased due to the smaller differential between the market price for electricity and the purchase obligation tariff payable to producers. For the same reason, the State adjusted the reduction in compensation levels paid in 2019, since the final expenses for 2018 were lower than the reforecasts on which compensation paid in 2018 had been based.

Public service charges borne by EDF

The amount of expenses (excluding the annual contribution to repayment and associated interest) to be compensated to EDF for 2019 is €7,662 million.

The amounts received in the year 2019 (excluding the annual contribution to repayment and associated interest) totalled €6,800 million (including €4,458 million for the dedicated “energy transition” budget account and €2,342 million for the general budget). EDF also paid the CRE an amount of €12.5 million in December 2019 as a first instalment of reimbursement of residual amounts from the former CSPE mechanism prior to 2016.

A repayment schedule for EDF’s receivable corresponding to the accumulated shortfall in compensation, which amounted to €5,780 million at 31 December 2015, was set out in the ministerial decision of 13 May 2016, amended on 2 December 2016. Under this schedule the receivable will be fully repaid by 2020. On 22 December 2016 EDF securitised a portion of this receivable (€1.5 billion) through a State-approved “Dailly law” assignment to two groups of assignees. Consequently, since 1 January 2017 EDF has received 73.6% of payments made by the State in reimbursement of the receivable as set out in the repayment schedule. The remainder is paid directly to the assignees.

During 2019, the State paid EDF €1,353 million of the principal amount of the financial receivable, equal to the annual contribution for 2019 as set out in the repayment schedule. At 31 December 2019, EDF’s share of the outstanding financial receivable amounted to €660 million which is due to be paid to EDF by the State.

The operating receivable owed by the State to EDF still amounts to €1,647 million at 31 December 2019. The situation will be closely monitored in view of the Finance Law for 2020 adopted by vote in late 2019, which provides for discontinuation of the special “energy transition” budget item from 2021.

Finally, in accordance with decree 2016-158 of 18 February 2016 concerning compensation for public energy service charges, on 11 July 2019 the CRE published its decision 2019-172 recording the public service charges for 2018 (€6,656 million) and providing a revised forecast of charges for 2019 (€7,123 million) and a forecast of charges for 2020 (€7,206 million).

4.5 French capacity mechanism

The French capacity mechanism took effect on 1 January 2017. It was introduced by France’s Energy Code to ensure secure national power supplies.

The market reference prices for 2017, 2018 and 2019 were established respectively at €10.00/kWh, €9.34/kW and €17.37/kW. The first “rebalancing” auction for 2019 held on 16 May 2019 resulted in a price of €0.00/kW.

Six auctions held in 2019 for energy deliveries in 2020 resulted in the following prices: €20/kW, €20/kW, €22.4/kW, €20/kW, €17.8/kW and €16.6/kW.

4.6 Energy savings certificates

Decree 2017-690 of 2 May 2017 issued by the French Ministry for the Environment, Energy and the Sea substantially raised the obligation levels for the fourth period of energy savings obligations running from 1 January 2018 to 31 December 2020, to 1,200TWhc for the “standard” obligations and 400TWhc for the obligations that are intended to benefit households in situations of energy poverty, compared to 700TWhc and 150TWhc respectively for the previous period.

This significant increase, combined with a shallow market for energy savings certificates and doubts over that market’s future liquidity, exposed the Group in 2018 to the risk of a fine payable to the Treasury (under Article L221-4 of the Energy Code) of €15 per MWhc of shortfall in respect of its obligation, due to insufficient certificates for the fourth period of the scheme.

In order to meet these requirements, the Group is making every effort to gradually increase its number of energy savings certificates, taking advantage of the “Coup de pouce” operations launched in France early in 2019 (financial aid for replacing oil heating by heat pumps, 50% additional energy savings subsidy for heat pump users, special offers for heat pump maintenance contracts, etc.). The volume of certificates earned doubled between 2017 and 2019, with a particularly notable increase of 44% between 2018 and 2019.

The law no. 2019-1147 of 8 November 2019 relating to Energy and the Climate, as well as prolonging the fourth period of the energy savings certificates scheme, includes a chapter on measures against fraud concerning these certificates designed to make controls and sanctions more efficient.

Subsequently, decree 2019-1320 of 9 December 2019, published in the Journal officiel on 11 December 2019, extended the fourth period by one year to 31 December 2021 under identical annual obligations. Also, Article 143 of the “PACTE” law for business growth and transformation broadens the scope of energy savings certificates to include facilities classified for environmental protection that are subject to greenhouse gas emission trading systems, by modifying Article L. 221-7 of the Energy Code.

The Group currently considers that due to the combined effect of the increase in certificates held and the extension of the fourth period, there is no risk of a shortfall in energy savings certificates at 31 December 2021.