CRE to restructure French nuclear sales scheme

French energy regulator CRE has proposed to restructure the Arenh nuclear output sale mechanism and rules surrounding its modification and cancellation in response to legal disputes that arose at the height of the Covid-19 crisis.

CRE has sought to redefine force majeure conditions under the mechanism, which regulates the sale of state-controlled utility EdF's nuclear output to alternative suppliers. The regulator suggested removing a reference to "reasonable economic conditions" in which parties are expected to meet their obligations and the lack of which can trigger the emergency clause.

The French ecology ministry is now expected to issue a ruling in line with CRE's suggestions ahead of the upcoming Arenh tender in late November.

The proposal does not aim to limit force majeure conditions but to bring more clarity to them by bringing them closer to how they are generally defined under civil law, CRE told Argus today.

But most alternative suppliers that took part in CRE's public consultation ahead of its deliberation expressed concerns against the redefinition, claiming the latter would restrict the execution of the force majeure clause by private companies and favour EdF. French associations for alternative suppliers and large customers — AFIEG and Anode — also argued that the clause was already clearly defined, whereas Uprigaz, the union of private-sector gas industries, supported CRE's proposal.

EdF was also in favour of the proposal, suggesting further restrictions to contract cancellations by alternative suppliers.

CRE's suggestion comes as the scheme drew fire at the height of the Covid-19 crisis, with private-sector suppliers seeking emergency relief on their purchases, citing rapidly declining demand and lower power prices on the over-the-counter market.

French spot prices averaged €15.33/MWh between mid-March — when the country went into lockdown — and the end of May amid rapidly declining demand. And the second-quarter contract expired at a record low €18.20/MWh at the end of March. In comparison, EdF, which operates France's 61.1GW nuclear fleet, sells up to 100 TWh/yr of its nuclear output to alternative suppliers under the mechanism at a fixed price of €42/MWh.

EdF initially rejected firms' force majeure claims, but was legally required to suspend sales volumes by the Paris commercial court. The firm in June unilaterally terminated its contract with three alternative suppliers, but the commercial court in July [overruled](direct.argusmedia.com/newsandanalysis/article/2123372) this decision. EdF has appealed against both rulings.

The French government is currently negotiating with the EU's wider reform plans for Arenh beyond 2025, including the introduction of a price corridor of €42-48/MWh. EdF in late July said it was awaiting the outcome of talks between Paris and the EU but would support modifications to the scheme.

By Bilal Muftuoglu