EDF price rises limited by French Energy Minister Segolene Royal

It was expected that the price rise would sit within a range of 3.5 to 8.0% but the rise was capped out at 2.5% from 1st August 2015.

According to CRE this move by Royal adds to continued losses from state-run (84% state owned) EDF of 2.1Billion Euros in lost revenues; simply because the price is being capped below what the market would have traded at.

This does cause an issue for new players in the market as the artificially capped price from EDF is hard to compete with; it makes it pretty much a monopoly player in the market until the markets open up on 1st Jan 2016.

However, noting the opening up of the market will remove the capping of prices by Royal we should expect to see perhaps 5-8% increases in the price from 01st Jan 2016. Whilst that is said the cost per unit on the stabilised Nuclear generation in France maintains a current prompt price of 20euros per MWh, along way south of the £40 per MWh in the UK, and much more stable when considering UK volatility.

There will certainly be a rush on in the market to try and pick up new business from the state run EDF; so perhaps a drop in service levels alongside energy price hikes can be expected; all in all not great news for French Businesses. At this stage sitting on an EDF capped price for a longer term would seem a good choice; low risk at least & unlikely to be higher than alternative options.