The accounting treatment of public distribution electricity concessions in France is determined by the concession agreements, with particular reference to their special clauses. It takes into consideration the possibility that the EDF group, particularly Enedis, may one day lose its status as the sole authorised State concession operator.
In application of the concession agreements, the concession operator manages the facilities at its own risk for the entire term of the concession, and bears substantially all the risks and benefits (both technical and economic) over the useful life of the network infrastructure. Under IAS 16, the assets are controlled by the operator and the grantors have no decisive characteristics of control over the infrastructures as defined by IFRIC 12.
All concession assets are consequently carried in the balance sheet, regardless of their origin (facilities constructed or purchased by the concession operators, and facilities provided by the concession grantors) and the source of financing, while the contractual obligations to the grantor are recognised in the liabilities.
Public electricity distribution facilities that are constructed or purchased by the concession operator are carried at production or acquisition cost:
New facilities provided by the concession grantors are carried at the value of the cost the Group would have borne if it had constructed them itself.
In the specific case of rising mains transferred for no consideration to the public distribution network in application of article 176 of French law 2018-1021 of 2 November 2018 on housing, development and digital affairs (the “ELAN” law), these assets are carried at their market value under article 213 of France’s national chart of accounts.
Balance sheet liabilities are recognised in respect of new facilities provided for no consideration by the concession grantors and the rising mains transferred under the ELAN law are included in “Special French public electricity distribution concession liabilities” in the balance sheet liabilities.
Distribution assets (pipes, substations, connections) are depreciated over periods of 30 to 60 years, meters and metering equipment over periods of 20 to 30 years. The Group regularly checks the relevance of the main accounting parameters for concession assets (depreciation periods, replacement values, management levels).
Since the enactment of the French Law of 8 April 1946, EDF, and subsequently Enedis, has been the concession operator of most of the public distribution networks in France.
SEI is the concession operator for distribution network zones that are not interconnected with the network in mainland France, under identical concession regulations to Enedis.
Électricité de Strasbourg is the concession operator for public distribution networks in a limited zone depending on a non-nationalised distributor, in application of the Law of 8 April 1946.
In accordance with France’s Energy Code and Local Authorities Code, the public distribution of electricity is principally operated under the public service concessions system. The authorities granting the concessions (local authorities or public establishments for cooperation acting as an Energy Distribution Organisation Authority (Autorité organisatrice de la distribution d’énergie – AODE)) organise the public electricity distribution service through concession agreements with specifications that define the respective rights and obligations of the parties. Enedis distributes electricity to 95% of the population of mainland France under such concessions, with 386 concession agreements at 31 December 2022. The other 5% are served by Local Distribution Companies (including Électricité de Strasbourg).
On 21 December 2017, the FNCCR, France Urbaine, EDF and Enedis signed a framework agreement for a new concession agreement model. This new model modernises the relationship between Enedis and concession-granting authorities in the long term and reflects the parties’ attachment to the principles of French concessions for electricity distribution: public service, regional solidarity and national optimisation. The FNCCR and France Urbaine represent the concession-granting authorities, particularly towns, syndicated municipalities, boroughs and major cities when they are the authorities with competence to grant public electricity distribution concessions.
Concession agreements signed since 2018 apply the concession agreement model validated on 21 December 2017. At the effective date of a new agreement, the existing special concession liabilities recorded in application of the previous concession agreement (corresponding to the 1992 model) to represent the concession- granting authority’s rights in the concession assets remain in the accounts. Like earlier concession agreements signed since 2011, the contractual obligation to establish provisions for replacement no longer exists, and the governance of investments is different.
To provide an effective public service, the distribution network operator and the concession-granting authority now agree to jointly set up a governance system to oversee investments in the public electricity distribution network over the area covered by the concession, including replacement of infrastructures. This system mainly takes the form of a master plan taking a long-term view of developments in the network over the concession area, and multi-year investment plans (programmes pluriannuels d’investissements – PPIs) for 4 and 5-year periods that are medium-term applications of the master plan.
PPIs contain detailed objectives for each investment purpose, concerning a selection of quantified, localised investments with financial valuations for the duration of the plan.
PPIs are revised when necessary, after consulting with Enedis and the authority granting the concession, to take account of changes in each party’s investment priorities and financial resources.
If it were observed at the end of a PPI that any investment concerned by Enedis’ financial commitment had not been made, the concession-granting authority could oblige Enedis to deposit a sum equal to 7% of the investments still to be made. This deposit would then be returned or retained after a two-year period, depending on the investments made by that time.
In accordance with the concession agreement model defined in late 2017 with the FNCCR and France Urbaine, negotiations for concession renewals continued in the regions of France during 2022. The phase of mass renewal of agreements is nearly finished.
By 31 December 2022, 302 concession agreements had been concluded under the new model validated in December 2017, for local projects with all kinds of concession-granting authorities: syndicated counties, two individual counties (départements), syndicated municipalities, major cities, urban boroughs, conglomerations and towns. 93% of contracts with the principal concession-granting authorities have thus been renewed under the new model.
