EDF / 2018 Reference document

PRESENTATION OF EDF GROUP Legislative and regulatory environment

The CRE completed its decision on 17 November 2016 with a decision of 26 October 2017, published in the Journal Officiel of 14 December 2017, on the remuneration to be paid by Enedis to suppliers for their management of single contract customers (“supplier commissioning”). Taking into consideration the changes made to the French Energy Code by Law no. 2017-1839 of 30 December 2017 ending the research and use of conventional and non-conventional hydrocarbons and introducing various provisions relating to energy and the environment, particularly those concerning the competence of the CRE in relation to supplier commissioning, the CRE has, in a new decision of 18 January 2018 published in the Journal Officiel on 25 January 2018, included all of its decisions of 26 October 2017. On 2 February 2017, Enedis appealed to the Council of State to set aside the two TURPE 5 HVA/LV decisions. On 3 February 2017, EDF also appealed to the French Council of State to set aside these CRE decisions. By a judgment dated 9 March 2018, the French Council annulled the TURPE 5 deliberations in so far as they did not apply the“risk-free rate” to the corresponding assets in determining the cost of capital invested, to works for which provisions for renewal have been allocated during the tariff period covered by the so-called“TURPE 2” tariffs (for their as yet unamortised fraction), and to works handed over by the licensing authorities to the grid operator during the same tariff period (for the same fraction). Such annulment shall not take effect until 1 August 2018. In response to the French Council of State's judgment, on 28 June 2018 the CRE issued a decision, published on 29 July 2018 in the Journal Officiel, on the TURPE 5a HVA/LV and its increase at 1 August 2018. Seeing as no aspect of the TURPE 5 HVA/LV is challenged by this decision, the TURPE 5a differs from the TURPE 5 only in taking the principles set out in the Council of State's judgment and the expected increase in the corporate tax rate into account. These changes were accounted for by a 0.06% increase on 1 August 2018 which when also taking inflation and adjustment entries into account led to a 0.21% decrease on average. The new tariff will be valid for a period of about three years and indexed to inflation on 1 August of each year (excluding adjustment entries and to a lesser extent the latest effects of accounting for the Council of State's judgment). In the context of TURPE 5 HVA/LV, Enedis' financial remuneration is derived from the sum of the remuneration on managed assets (RAB paid at 2.5%) and the remuneration of regulated shareholders' equity (remunerated at 4.0%). This decision encompasses the CRE's previous decisions on costs relating to the management of single contract customers, via the management component, and on collective consumption (decision of 7 June 2018) introducing a new tariff for collective self-consumption connected to the low voltage network with no changes to the tariff for individual self-consumption. Linky regulation The Linky project is subject to a specific regulatory framework regarding meters operating life (20 years), with a dedicated regulated asset basis (RAB) for the meters installed between 2015 and 2021 and the associated systems. The CRE’s decision dated 17 July 2014 also set a nominal return rate before tax of 7.25% and a 3% additional premium in return for an incentive regulation to better meet costs and system performance, targets as well as deadlines bringing the return on the RAB to 10.25%. The incentive regulation can also trigger penalties potentially lowering the return, although not below a floor of 5.25%. In addition, the implementation of a postponed tariff, set up to guarantee a neutral impact of Linky on the tariff for customers, means that payments for the 2014-2022 period will be made during the 2023-2030 period. This postponed tariff, which is attached a 4.6% compensation covering the cost of financial carry, will be totally paid by 2030. At 31 December 2018, the deferred amount is +€950 million (this represents a receivable from Enedis in relation to their network users, which is not recognised on the Group's balance sheet at 31 December 2018, pursuant to the accounting standards in force on this date).

The CRE now has significant decision-making power to set the Tariffs for Using the Public Transmission and Distribution Networks (TURPE): it sends its reasoned decision to the administrative authority, which can only ask the CRE for a new decision in the event of non-compliance with energy policy guidelines. Under its residual regulatory power, the CRE also takes network connection decisions, as well as decisions to define the rules for calculating and adjusting the rights of suppliers to the ARENH. The CRE is also vested with very broad powers that enable it to obtain any information that it may deem useful for the fulfilment of its remit, as well as authority to settle disputes and to apply penalties, through the Settlement of Disputes and Sanctions Committee (CoRDiS). The Law on Energy Transition for Green Growth also gives the CRE the possibility of having the information it obtains through its remits audited, at the expense of the audited undertakings. Organic Law no. 2017-54 of 20 January 2017 on Independent Administrative Authorities and Independent Public Authorities and Law no. 2017-55 of 20 January 2017 on the General Statute of Independent Administrative Authorities and Independent Public Authorities, provided these authorities, including the CRE, with a common legal status. These laws mainly lay down the rules relating to the mandate of members, the ethics of members, the operation and organisation of these authorities and parliamentary control. Regulatory framework Tariff for Using the Public Transmission and Distribution Networks (TURPE) Pursuant to Article L. 341-3 of the French Energy Code, the tariff for using the public electricity transmission network is set by way of a reasoned decision by the CRE. The tariff for using the public transmission network (TURPE 5 HVB) entered into force on 1 August 2017 for a period of four years. This tariff was set by the decision of the CRE of 17 November 2016 and was published in the Journal Officiel on 28 January 2017. This decision provided for an increase of 6.76% on 1 August 2017, followed by an inflation-based change on 1 August of each year (apart from corrections arising from the income and expense regularisation account). On 1 August 2018 the tariff was raised by +3% indexed to inflation. The financial remuneration of RTE's assets is derived from the product of the regulated asset base (RAB), estimated on 1 January 2018 at €14,119 million, by a fixed remuneration rate. This remuneration rate corresponded to a nominal rate before tax of 7.25% for the 2013-2016 tariff period. For the 2017-2021 period, this rate is 6.125% before tax. Concerning the transmission and distribution of natural gas (Law no. 2003-08 dated 3 January 2003), see section 1.5.4.2 “French legislation: The Energy Code”. Tariff for using the public electricity distribution networks (distribution TURPE) Over 90% of Enedis’ sales are made up of revenues made from electricity transmission. The tariff for using the public electricity network (TURPE), in terms of levels and structure, is set by the CRE in a transparent and non-discriminatory manner, in order to cover all the costs borne by the efficient network operators. On 17 November 2016 the CRE set a new TURPE 5 HVA/LV. The new tariff came into force on 1 August 2017 for an initial period of about four years and provided for increases indexed to inflation on 1 August of each year between 2018 and 2020 (excluding corrective effects from the regularisation account for income and expenses). The Minister for Energy, who has a two-month deadline, by a decision of 12 January 2017 published in the Journal officiel dated 17 January 2017, requested a new decision, considering that the CRE’s project did not take into account the country’s energy policy. Through a new decision dated 19 January 2017, the CRE confirmed its initial decision of 17 November 2016. Both decisions were published in the Journal Officiel of 28 January 2017.

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EDF I Reference Document 2018