EDF / 2019 Universal registration document

1. The Group, its strategy and activities Legislative and regulatory environment

In their current version, the REC provisions fail to make a clear distinction between RECs and collective self-consumption operations, but this confusion should be resolved by the decree to be issued following consultation of the Council of State provided for in the provisions. Closed distribution networks Article 167 of Law no. 2015-992 of 17 August 2015 on Energy Transition for Green Growth authorised the Government to take any measure, by way of an order, arising from the law in order to add a section on closed distribution networks to the French Energy Code to provide a framework for a practice made possible by Article 28 of Directive 2009/72/EC. Following Order no. 2016-1725 of 15 December 2016 on closed distribution networks, Articles L. 344-1 et seq. of the French Energy Code specify the definition of the closed distribution networks, their legal regime, missions assigned to the manager of the closed distribution network and the sanctions applicable if these provisions are not adhered to. Article L. 344-13 of the French Energy Code provides that the terms and conditions for applying these provisions are defined by decree of the Council of State. To date, this decree has not been adopted. A draft law to ratify the order was registered in the French Senate on 15 February 2017. Domestic networks Law no. 2017-1839 of 30 December 2017 ending the exploration and use of conventional and non-conventional hydrocarbons and introducing various provisions relating to energy and the environment has defined and authorises the creation and operation of domestic building networks which constitute a new category of networks alongside public electricity distribution or transmission networks, and closed electricity distribution networks. Pursuant to Articles L. 345-1 et seq. of the French Energy Code, domestic networks can now only be legally created if four criteria are met: the domestic building from which the network will be created must i) stand alone, ii) belong to a single owner, iii) be used primarily for offices, iv) not contain any dwellings. Decree no. 2018-402 of 29 May 2018 on domestic building networks sets out the conditions under which these networks may exist as well as the rights and duties of office building owners and managers, network users and electricity public distribution networks managers. Electricity sector regulation The Energy Regulation Commission (CRE) The Energy Regulation Commission (“CRE”) is an independent administrative authority created by Article 28 of the Law of 10 February 2000. Articles L. 131-1 et seq. of the French Energy Code give a general definition of the remit of the CRE, which is tasked with contributing to the correct functioning of the electricity and natural gas markets for the benefit of final consumers. In this respect, the CRE ensures, in particular, that the conditions for access to electricity and natural gas transmission and distribution networks do not impede the development of competition. The CRE has significant powers: the power to make proposals, advisory powers and decision-making powers (approval power and regulatory power). The CRE makes proposals, in particular, to the Ministers for the Economy and for Energy regarding the amount of the costs that are attributable to the public service missions assigned to power producers, and the net amount of the related contributions. Once the Decree has been published that specifies the methods for identifying and recognising the costs that are taken into account for the calculation of the ARENH price, the CRE will also propose the ARENH price. Moreover, since 7 December 2015, it has been the CRE’s responsibility to send its reasoned proposals for changes in the regulated sales and transfer tariffs for electricity (on which it previously could only issue an opinion) to the Ministers for the Economy and Energy. The decision is deemed to have been made in the absence of any objections by one of the Ministers within the three months following the receipt of these proposals. 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. The Energy and Climate Law of 8 November 2019 modifies the composition of the CRE council. 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 sets up an initial 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 2019 the tariff was raised by +2.16%. The financial remuneration of RTE’s assets is derived from the product of the regulated asset base (RAB), estimated on 1 January 2020 at €14,440 million, by a fixed remuneration rate. This remuneration rate corresponds to a nominal rate before tax of 6.125% for the current tariff period. Concerning the transmission and distribution of natural gas (Law no. 2003-08 dated 3 January 2003), see section 1.5.2.2.2 “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 28 June 2018, the CRE adopted TURPE 5 bis HVA/LV (medium voltage – low voltage). This tariff came into effect on 1 August 2018 for a period of approximately three years. It involves an inflation-linked change on 1 August 2019 and 2020 (apart from corrections arising from the income and expense regularisation account). In the context of TURPE 5 bis 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%). In a decision dated 25 June 2019, the CRE set the average increase in the tariff on 1 August 2019 at +3.04%, in accordance with the annual adjustment formulas. Linky regulation The Linky project, led by Enedis, 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 system. The CRE’s decision dated 17 July 2014 thus 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%. As provided for in the decision dated 17 July 2014, the incentive regulation of the system’s performance for 2020 and 2021 was set by the CRE in a decision dated 19 December 2019. 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.

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EDF | Universal registration document 2019

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