EDF / 2018 Reference document

1.

PRESENTATION OF EDF GROUP Legislative and regulatory environment

1.5.4 European legislation 1.5.4.1

GAS MARKET LEGISLATION

contract with the supplier of their choice before 31 December 2015, were allowed, in order to ensure the continuity of their electricity supply, to continue to benefit from a contract with their incumbent supplier during a maximum transition period of six months, at the end of which they would no longer be supplied (i.e. 30 June 2016). During this period, customers had the opportunity to terminate this contract at any time without having to pay an indemnity. The supplier was under an obligation to remind the customers concerned, by letter, of the term of the transitional contract three months and one month before it would automatically come to an end. Order no. 2016-129 of 10 February 2016 introduced, from 1 July 2016, a mechanism ensuring the continuity of the gas and electricity supply: customers who, on 30 June 2016, have not subscribed to the market offering are deemed to have accepted a new contract proposed by the designated supplier, following a competition procedure, by the CRE in its decision of 4 May 2016. In November 2016, the CRE organised a new call for tenders for the lots that could not be allocated in May 2016 and for newly-concerned and for the newly concerned consumption sites. This call for tenders made it possible to award one lot for gas supply contracts. Through a decision of 19 July 2017, the Council of State annulled the Decree of 16 May 2013 on regulated natural gas sales tariffs on the grounds that maintaining such tariffs is contrary to European Union law. Indeed, regulated natural gas sales tariffs do not fulfil the conditions laid down in Directive 2009/73/EC and, in particular, do not pursue any objective of general economic interest. However, that decision only annulled the disputed decree and not the regulatory provisions of the Energy Code relating to regulated natural gas sales tariffs in force since 1 January 2016. As such, regulated natural gas sales tariffs remain as long as the Prime Minister does not repeal these provisions. The PACTE business reform bill gives the government the authority to take any measures falling within the scope of the law, by decree within six months of the law's promulgation, bringing regulated gas and electricity sales tariffs in line with European Union law, and to apply them to affected contracts in force according to the terms and conditions it sets out under which said tariffs are cancelled and, as the case may be, market tariffs are set in their place at those dates. Regulated sales tariff contracts will be terminated on 1 July 2023. The government is further authorised to take measures, by decree, so as to provide a supply of last resort to domestic consumers without a natural gas supplier as well as to provide an emergency supply in replacement of a supplier incapable of or barred from doing business in order to ensure continuity of supply to end consumers. Suppliers Article L. 443-4 of the French Energy Code defines suppliers as persons who (i) are established on the territory of a Member State of the European Union or on the territory of another State pursuant to international agreements, and (ii) hold a licence issued by the Minister for Energy. EDF is authorised to supply natural gas to non-household customers that do not provide services in the public interest, pursuant to an Order of the Deputy Minister of Industry of 14 September 2004, and, pursuant to an Order of 9 August 2005, to non-household customers that provide services in the public interest, as well as to natural gas distributors and suppliers, and, pursuant to an Order of 15 June 2007, to household customers. EDF only supplies its customers at market-based prices. Regulated sales tariffs can only be proposed by Engie and LDCs responsible for gas supply. Underground storage and third-party access to natural gas storage facilities Article L. 421-4 of the French Energy Code requires all suppliers to hold, on 31 October of each year, directly or indirectly through an agent, sufficient inventories of natural gas in France to meet their direct or indirect contractual obligations to supply household customers and other customers that provide services in the public interest or that have not contractually accepted an interruptible gas supply, during the period between 1 November and 31 March. Articles R. 421-1 et seq. of the French Energy Code specify the legal framework that applies to underground storage facilities for natural gas. The Order of 31 July 2017 defined the terms and conditions for taking into account other modulation instruments for the implementation of the obligation of natural gas suppliers to declare and hold stocks and their storage capacities.

Directive no. 98/30/EC of 22 June 1998 and Directive no. 2003/55/EC of 26 June 2003 were the major steps towards opening up the gas market to competition. New rules aimed at improving the functioning of the internal natural gas market were defined in Directive no. 2009/73/EC of 13 July 2009, and by regulation (EC) no. 715/2009 of 13 July 2009 on conditions for access to the natural gas transmission networks. Pursuant to this legislation, the network codes for capacity allocation mechanisms (CAM) and (balancing) rules officially entered into force on 1 November, and 1 October 2015 respectively. The first requires the capacities at interconnection points between transmission networks to be commercialised by bundling the output capacity of the first network with the input capacity of the second network, and by selling these interconnection capacities via auction. This first code has been replaced by a new code from regulation (EU) 2017/459 of 16 March 2017. The purpose of the second is to harmonise the balancing rules on transmission networks. These codes have been completed by a network code on the standardisation of tariff structures for the transmission of gas from regulation (EU) 2017/460 of 16 March 2017. French legislation: the Energy Code 1.5.4.2 Directive no. 2009/73/EC of the European Parliament and of the Council of 13 July 2009 was transposed into French law by Order no. 2011-504 of 9 May 2011, which organised the legislative section of the French Energy Code. The French Energy Code entered into force on 1 June 2011. Access to natural gas networks The French Energy Code provides that customers, suppliers and their agents have a right to access natural gas transmission and distribution infrastructures, as well as LNG facilities, under the terms and conditions set forth in an agreement with the operators that run them. Natural gas network operators must refrain from discriminating between users or categories of users in any way. Customers Since 1 July 2007, all customers can freely choose their supplier. Pursuant to the provisions of Article L. 445-4 of the French Energy Code, household and non-household customers who consume less than 30,000kWh per year may benefit from regulated tariffs, at their request and without having to meet any conditions. Household customers who are entitled to the special “basic necessity” rate for electricity may benefit from a special solidarity tariff that is applicable to the supply of natural gas for part of their consumption. This special tariff will gradually be replaced by the “energy voucher” system (see section 3.2.3.2“Contribution to the fight against energy poverty”). Customers whose consumption exceeds 30,000kWh per year can only benefit from regulated gas sales tariffs for a site if no market-based offer has been accepted for the site concerned, pursuant to Article L. 445-4 paragraph 2 of the French Energy Code. Non-household final customers who consume more than 30,000kWh per year and who still benefit from the regulated tariffs for the sale of natural gas that are stipulated in Article L. 445-3 of the French Energy Code are no longer eligible for these tariffs: for non-household consumers who are connected to the transmission network, ■ since 18 June 2014; for non-household consumers whose consumption level has exceeded ■ 200,000kWh per year, since 31 December 2014; for non-household consumers whose consumption level has exceeded ■ 30,000kWh per year, since 31 December 2015. Article 25 of Law no. 2014-344 of 17 March 2014 on consumption introduced a six-month transitional period, during which customers who had not signed a new

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EDF I Reference Document 2018