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HomeBusinessFrance considers implementing windfall levy to regain control over energy prices.

France considers implementing windfall levy to regain control over energy prices.

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France is considering implementing a windfall levy as part of its efforts to cap national electricity prices and regain control over pricing. The proposed mechanism would involve setting a price ceiling for state-owned nuclear power producer EDF’s electricity sales, with revenues above this threshold being redistributed to end users. The French government hopes to operate this framework without violating EU subsidy rules, but it remains uncertain whether France can act unilaterally. President Emmanuel Macron’s pledge to “take back control” of prices has raised concerns in Brussels, where negotiations for electricity market reforms are ongoing.

Macron’s move reflects France’s frustrations with the ongoing talks on the reform of the electricity market design at the European level. The French government seeks to ensure the domestic production of energy and avoid a repeat of the reactor outages that made the country a net power importer last year. With EDF’s dominant position and its role as a former monopoly, every decision involving the company necessitates negotiations with Brussels to comply with state aid and competition rules. As the current framework for EDF’s power sales expires, discussions on price mechanisms and potential replacements have become critical.

EDF CEO Luc Rémont is reportedly open to a price-ceiling solution, although clashes with the government regarding the level at which it should be set have added complexity to the situation. France’s energy regulator has established that the cost of producing energy for EDF will be around €61 per megawatt hour, while the government pushes for a price as close as possible to this figure. EDF argues for a higher price to fulfill Macron’s plan of constructing six new reactors at an estimated cost of €52 billion. Ultimately, France will need to discuss its plans with its European partners, and negotiations will continue to shape the future of the country’s electricity market.

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