European Commission Proposals Could Significantly Change French Energy Supply and Distribution

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Researched by Industrial Info Resources (Sugar Land, Texas)--France, where the gas and electricity network is dominated by 70% state-owned Electricite de France (EdF) (Euronext Paris: EDF) (Paris), has received regular criticism from the European Commission (EC). EdF is one of Europe's largest energy companies supplying energy and services to 35.6 million customers in Europe and a total 41.6 million customers worldwide. The EC believes that minimal competition inside member states and the lack of a European power market are maintaining artificially high electricity prices and hindering investment in infrastructure. Further, the EC has criticized France believing that consumer choice is being stifled because of EdF's monopoly of both generation and supply. As a result EdF is being slowly privatized and the electricity sector is being opened to other companies.

France adopted its first deregulation legislation concerning electricity distribution in February 2000, a full year after the European Union's first implementation deadline and only relevant for the distribution to non-residential customers. Full deregulation followed in 2007 encouraging small companies such as Poweo (Euronext Paris: Alpwo) (Paris) to purchase wholesale electricity from EdF in order to enter the French distribution market.

In September 2007, the EC proposed options to deregulate the European Union energy sector. Member states were asked to force integrated energy companies to sell non-energy generating assets including power transmissions and gas storage. If they weren't willing to give up ownership of these assets they would have to hire independent operators to take over the investment and commercial decisions.

This would mean that integrated companies such as EdF could not generate power and own the grid. The aim is to encourage new entrants into the market and give consumers more choice. These proposals were rejected by France alongside Germany and six other states. These countries unveiled an alternative in January 2008 entitled the "Third Way" that proposed a combination of rules on good governance and competence to liberalize the market

By not unbundling its generation and supply activities EdF has made it difficult not only for new entrants but also overseas competitors to enter the French market. For example, French and German companies have 40% of the UK energy supply market while UK companies have found it very difficult to enter France. EdF has taken advantage of previous liberalisation and operates throughout Europe.

EdF also operates further afield in Africa, South and Central America and Pacific Asia, notably in China where it in the field of nuclear energy. In 2007 EdF and China Guangdong Nuclear Power Company signed a joint venture agreement for the ownership, construction and operation of two new-generation reactors in Taishan. Construction could begin during 2009 and the units are expected to go into service in 2014.

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