Universal Registration Document 2021

Accounting principles and methods

Sales essentially comprise income from energy sales (to final customers and as part of trading activities), delivery services related to use of the transmission and distribution network, and connection services. They also comprise income from other services and deliveries of goods, mainly engineering, operating and maintenance services, services related to energy sales, design, delivery and commissioning services for power plants or their major components.

Income on energy sales is recognised as deliveries are made to customers.

The quantities of energy supplied but not yet measured and billed are calculated using consumption statistics and selling price estimates, and are recognised in sales on that basis.

Some Group entities conduct optimisation operations on the wholesale gas and electricity markets, to balance supply and demand in compliance with the Group’s risk management policy. The sales concerned are recorded net of purchases. When an entity has a net short position in euros, it is included in “energy sales”. A net long position in euros is included in “fuel and energy purchases”.

In accordance of IFRS 15 on the principal/agent distinction, energy delivery services are recognised in sales upon delivery to the customer in the following two cases:

• when these services are not distinct from the energy supply service;
• when they are distinct from the energy supply service and the entity concerned is acting as a principal, notably because it bears the risk of execution of the service or is able to set the tariff for delivery to the final customer.

Income from connections to the French electricity network is recognised in sales at the date when the connection becomes operational.

The sales revenue from other services or deliveries of goods is recognised over time in the three following cases, based on a contractual analysis:

• when the customer simultaneously receives and consumes all the benefits generated as the service is performed by the Group (this is notably the case of operations and maintenance services);
• when the good or service to be supplied cannot be reallocated to another customer, and the Group is entitled to payment for the work done so far (this is notably the case of certain design, delivery and commissioning activities for power plants or major components designed specifically for a customer);
• when the service creates or enhances an asset (good or service) for which the customer acquires control as performance of the service progresses.

Trading activities

Sales revenues include the margin realised, essentially by EDF Trading, on energy market trading operations that fall within the scope of IFRS 9, which are recognised at fair value.

EDF Trading is the Group’s trading entity. It operates on the markets on behalf of other Group entities and through trading activity for its own purposes or for non-Group entities, backed by the Group’s industrial assets and within its assigned risk mandate.

EDF Trading trades on organised or OTC markets in derivatives such as futures, forwards, swaps and options.

EDF Trading undertakes purchase and sale operations on the wholesale markets in Europe and North America for:

• electricity and fuel (principally gas);
• CO₂ emission permits, weather derivatives and other environmental instruments;
• capacity guarantees for electricity production.

EDF Trading also operates in the unregulated North American markets as part of its energy supply activities.

For LNG, optimisation activities (recognised as a joint operation) and trading activities (recognised as a joint venture) are carried out through JERA Global Markets, which is jointly owned with JERA.

Capacity mechanism

Capacity mechanisms have been set up in France, the UK and Italy to ensure secure power supplies during peak periods.

French system: French law 2010-1488 of 7 December 2010 on the new organisation of the electricity market introduced an obligation in France to contribute to guaranteeing a secure power supply from January 2017.

Operators of electricity generation plants and load-shedding operators must have their capacities certified by RTE, and commit to a forecast level of availability for a given year of delivery. In return, they are awarded capacity certificates.

Meanwhile, electricity suppliers and purchasers of power to compensate for network losses (obligated actors) must have capacity certificates equivalent to consumption by their customers in peak periods. Suppliers pass on the cost of the capacity mechanism to final customers through their sale prices.

The system is completed by registers for capacity trading between actors. Capacity auctions are held several times a year.

The Group is concerned by both aspects of this system, as an operator of electricity plants (EDF SA, Dalkia, EDF Renewables), as an electricity supplier (EDF SA, Électricité de Strasbourg) and as a purchaser of power to compensate for network losses (Enedis and Électricité de Strasbourg).

As a result of the capacity mechanism review clause, in 2021 RTE published a report on the mechanism’s first few years of operation and performance. On the basis of this report, on 29 November 2021 RTE submitted rule change proposals to the CRE for its opinion. In decision 2021-370 of 16 December 2021, the CRE issued a favourable opinion of these proposals and of changes to certain parameters for delivery years 2023 and 2024 (the contribution by interconnections, the extreme temperature vector and the safety coefficient). The CRE considered that the proposed changes will simplify the capacity mechanism for all actors, and improve visibility for capacity market participants. The new rules were approved by decision of the Ministry for the Ecological Transition on 21 December 2021. They set the opening date for trading of capacity guarantees for delivery years 2023 and 2024 at 1 March 2022.

The auctions organised by EPEX Spot for delivery years 2023 and 2024 will be held from March 2022.

Another consultation phase is due to take place in 2022. It will concern structural changes to the capacity mechanism starting from delivery year 2025, which will require approval by the European Commission.

The trading sessions of 2020 registered a significant increase in capacity prices for the 2020s and subsequent years from the auction in June 2020. This is mainly explained by the market actors anticipating lower fleet availability for peak periods, in the context of the Covid-19 crisis. In 2021, prices generally remained high, sustained by electricity prices and tensions on the electricity system for the winter 2021-2022.

For delivery years 2017 to 2021, the mean market prices resulting from capacity auctions ahead of the delivery year were as follows: