EDF_REGISTRATION_DOCUMENT_2017

1.

PRESENTATION OF EDF GROUP Legislative and regulatory environment

the French authorities to the European Commission is therefore based on an adaptation of the applicable French regulations in 2018 so that such commitments may be effectively implemented by 2019 (the year of delivery). Concerning the introduction of long-term contracts, the French authorities have undertaken to implement the mechanism so as to carry out a capacity selection process in 2019 and to ensure an initial effective participation of the capacities selected for the delivery year 2023. Moreover, they undertake to introduce no later than in 2019 a transitional system of multi-year contracts in order to cover the period between 2020 and 2023. For example, this would mean that in 2019, a “sustainable” mechanism for the delivery year 2023 would be introduced, along with a transitional mechanism for the delivery years 2020, 2021 and 2022 (cf. recital 138 of the European Commission decision of 8 November 2016). Electricity load shedding The Law of 17 August 2015 on Energy Transition for Green Growth amended the legal rules on load shedding and, in particular, Articles L. 271-1 et seq. of the French Energy Code on this subject. These provisions amend the previous legal rules and stipulate, in particular: that load shedding is defined as “the action to reduce temporarily the effective ■ withdrawal level of electricity from the public electricity supply and distribution networks by one or more consumption sites, compared to a forward-looking consumption plan or an estimated consumption, when an ad hoc request is sent to one or more final consumers by a load manager or an electricity supplier”; that there is the possibility for consumers to monetise each of their demand ■ responses, either vis-à-vis their supplier as part of a demand response offer that is inseparable from the supply, or via the intermediary of load managers; that the Government will organise calls for tenders if the load management ■ capacities do not meet the targets of the multi-year energy plan (this mechanism replaces that of the load shedding premium); finally, for load shedding that leads to significant energy savings, the law ■ provides that the administrative authority may require the payment to the supplier to be shared between the load manager and RTE. The terms and conditions for applying these provisions are specified in Articles R. 271-1 et seq. of the French Energy Code, last completed by Decree no. 2017-437 of 29 March 2017 and by the rules for valuing the demand response on the wholesale energy markets (known as the “NEBEF 3.0 ” rules) approved by the CRE on 7 December 2016 and applicable for 2017 and the rules concerning scheduling, the balancing mechanism and the recovery of balancing charges, in their version approved by a decision of the CRE of 7 December 2016 and applicable for 2017. Self-consumption of electricity Article 119 of Law no. 2015-992 of 17 August 2015 on Energy Transition for Green Growth authorised the Government to take, by way of an order, the necessary measures to ensure the controlled and secure development of facilities intended to consume all or some their own electrical output. Following Order no. 2016-1019 of 27 July 2016 on the self-consumption of electricity came the publication of Articles L. 315 to L. 315-8 of the French Energy Code on 28 July 2016, which were ratified and completed by the Law of 24 February 2017 and distinguish between individual and collective self-consumption and in particular: require network operators to facilitate self-consumption operations, to implement ■ the necessary technical and contractual arrangements, particularly with regards to the metering of electricity and to enable the realisation of self-consumption operations under transparent and non-discriminatory conditions; provide that the CRE establish special tariffs for public distribution networks for ■ consumers participating in self-consumption operations when the installed capacity of generation facilities supplying them is less than 100 kilowatts. The provisions of Decree no. 2017-676 of 28 April 2017 amending the French Energy Code specifies the conditions for applying these provisions, particularly with regards to collective self-consumption (no measurement used to qualify self-consumption, procedures for assessing the 100kW threshold provided for by law for the eligibility of TURPE “self-consumption” facilities to be defined by the CRE, general principles of distributing generation between each consumer participating in a collective self-consumption operation, link between the legal entity responsible for a collective self-consumption operation and the public distribution network

On 22 December 2016, EDF sold part (26.40%) of this debt to a pool of investors comprised of a bank and a dedicated Special Purpose Entity (SPE). The proceeds of this sale without recourse totalled €1.542 billion. The debt sold includes a component which is not classified as dedicated assets. The sale of this component has led to an improvement of the Net Indebtedness of approximately €645 million. The remainder corresponds to the portion of the debt that was allocated to Dedicated Assets. It will be reinvested in these assets. Compensation for additional distribution costs The purpose of the Electricity Equalisation Fund (FPE), the accounting management of which is entrusted to EDF under Article L. 121-29 of the French Energy Code, is to distribute the charges incurred as a result of public service missions assigned for managing the electricity distribution networks among the operators concerned, in particular those linked to the specificities of the networks operated and that will not be covered by the portion relating to the use of those networks in the regulated tariffs or by the tariffs for using the public electricity distribution networks. The costs linked to involvement in the development of areas with particular geographical, economic or social difficulties, as defined by Article 42 of Law no. 95–115 of 4 February 1995, are also concerned. Capacity guarantees Articles L. 335-1 et seq. of the French Energy Code, which are taken from the NOME Act (New Organisation of the Electricity Market – Nouvelle Organisation du Marché de l’Électricité), obligate each electricity supplier to contribute to the security of electricity supply in continental metropolitan France, in light of its customers’ power and energy consumption patterns. Each supplier must therefore provide annually, under penalty of an administrative sanction, an amount of capacity guarantees according to its customers’ consumption at peak periods. Suppliers will obtain these capacity guarantees from generation or load operators, which must first have their capacities certified by the public distribution network manager. The aims of this mechanism are: to make it possible to maintain or develop generation or load shedding capacities ■ that ensure the level of security of supply set by the public authorities; to improve the remuneration of these capacities; ■ to share the expense of this security of supply among all suppliers. ■ The “capacity mechanism rules” proposed by RTE were approved by a ministerial order of 22 January 2015 after consulting the CRE. The Law of 17 August 2015 on Energy Transition for Green Growth has adapted the capacity mechanism to small players allowing LDCs to transfer their capacity obligations, no longer just to other LDCs but “to any other supplier” and allowing electricity suppliers to transfer their capacity obligations to a final consumer for its consumption or to a public network operator for its losses (Article L. 335-5 of the French Energy Code). Moreover, Article L. 335-3 of the French Energy Code introduced the possibility for all capacity operators to transfer to a third party their liability for discrepancies between effective capacity and certified capacity, and the payment of the penalties in respect of said discrepancies. On 13 November 2015, the European Commission opened an in-depth investigation in light of European rules on State aids, with respect to the planned French capacity mechanism. On 8 November 2016, the European Commission approved French plans for a capacity mechanism. During the investigation, France agreed to amend the mechanism as follows: introduction of long-term contracts (7 years) for new capacities, taking into account foreign capacities and measures to prevent any manipulation of the market. Revisions made for the improvement of market transparency and surveillance led to the publication of the Order of 29 November 2016. This made it possible for the mechanism to enter into force on 1 January 2017: the first auction of capacity guarantees on EPEX took place on 15 December 2016 and 22.6GW of capacity

guarantees were traded at a price of €10/kWh. Over-the-counter transactions remain possible.

The implementation of the commitments concerning the opening of the mechanism to foreign capacity providers requires a revision of the 2012 Decree, adopted in 2012 by the Council of State after reviewing the opinions delivered by the Higher Energy Council, the National Council for Standards Assessment, the Energy Regulation Commission and the Competition Authority. The timetable presented by

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EDF I Reference Document 2017