Workers at EDF, France’s biggest electricity provider, are striking today (January 26) in protest against government measures designed to prevent consumer tariffs from rising.
In September, the government announced that electricity tariff rises would be capped at 4% in February – as opposed to a natural rise which would amount to around 45% – and to ensure this it has this month increased the amount of electricity which EDF must sell to its competitors at low prices.
Under the measures, EDF will have to sell up to 40% of the electricity it produces in 2022 at cut prices, estimated to result in a loss of €8billion for the company, which already faces a €42billion debt.
The 40% proportion is 20% more than normal, though the additional cut price supply will be sold at a slightly increased rate, it has been agreed.
With this more plentiful supply of cheaper electricity, alternative suppliers will be able to keep customer tariffs down.
Why are workers angry?
The four unions which represent EDF employees – FO, CFE-CGC, CFDT and FNME-CGT – are concerned that this decision is “organising the destruction of EDF.”
Jean-Bernard Lévy, EDF’s CEO and chairman, is also reported to have spoken of his “real shock” at the government’s actions in an internal message to the company’s management.
“It is not what we had proposed to the government,” he said, adding that the increased proportion of low price electricity will “weigh heavily on our results.
“Many of you have shared their support, and indeed their indignation, and I share this emotion.”
FNME-CGT claims that the government’s decision is “senseless and illusory,” and that it “has made the choice to kill EDF.”
The unions have therefore called for strike action in response to this “scandalous decision to increase the Accès régulé à l’électricité nucléaire historique (Arenh, electricity sold more cheaply to alternative providers), which will ruin the role of EDF.”
“What has outraged EDF employees, with this Arenh increase, is that now they will be working even more for their competition,” Alexandre Grillat, president of CFE-CGC Energies, told Le Monde.
EDF employees are also calling for pay rises, with FNME-CGT saying that: “In 10 years, salary scales have shrunk by 10% against cumulative inflation.”
The unions have not yet released details of the number of employees who are expected to strike today.
Why does EDF sell cheap electricity to its competitors?
EDF’s monopoly on French electricity supply was opened up to competition in the early 2000s, and in 2010, the Arenh initiative was created by the ‘Nome’ law.
This means that alternative suppliers do not have unlimited access to nuclear energy; normally they can buy up to 25% of all nuclear production (100 TWh) from EDF at €42 per MWh.
If EDF’s competitors need more electricity than this quota can provide, they must rely on the constantly shifting state of the wider market.
For EDF, this means that when the global market rate falls below €42, no one buys its electricity, but when they rise above €42, it must maintain this cheaper tariff.
The extra 20% of cut price electricity which EDF must sell will be available at the slightly elevated price of €46.20 per MWh.
On January 20, EDF’s central finance board launched an alert regarding the economic state of the company.
Since the firm is 84% state-owned, it will not be in danger of collapsing, but its financial losses will have a knock on effect on government funds and, in turn, on the public.
Unions have reportedly called for intervention from the Autorité des marchés financiers, France’s stock market regulator.
In order to ease the pressure which the company currently faces, the government may decide to increase the funding it gives to EDF, and part of this cost will be passed on to the taxpayer.