EDF_REGISTRATION_DOCUMENT_2017

FINANCIAL STATEMENTS Notes to the financial statements

REGULATORY CHANGES IN 2017 NOTE 3 REGULATED ELECTRICITY SALES 3.1 TARIFFS IN FRANCE

29 December 2016 (the finance law for 2017) stipulated that the two sources of additional funding for this special budget item would be a portion of the domestic tax on coal, lignite and coke (TICC), and a portion of the domestic tax on energy products (TICPE). The finance law for 2018 replaces the percentages of the TICC and TICPE by a set amount, to avoid the uncertainties of forecast income from these taxes, and broadens the sources of funding for the “Energy transition” Budget item to include the proceeds of auctions of Guarantees of Origin as allowed by Article L. 314-14-1 of the Energy Code; other public service charges – excluding costs associated with the subsidy ■ mechanisms for renewable energies – (fuel poverty, tariff equalisation in zones that are not connected to France’s mainland network, cogeneration, the budget for the energy ombudsman, etc.) are registered directly in the general budget; income generated by the domestic tax on the final consumption of electricity, ■ now renamed the Contribution to Public Electricity Service (Contribution au Service Public de l'Electricité - CSPE) goes directly into the general budget. The CSPE is collected directly from final consumers of electricity in the form of an additional levy on the electricity sale price (and collected from electricity suppliers), or directly from electricity producers that produce electricity for their own uses. The level of the CSPE is set at the same level in 2018 as in 2017 with the full rate at €22.5/MWh, and seven reduced rates ranging from €7.5/MWh to €0.5/MWh depending on criteria of electro-intensiveness, business category and the risk of carbon leakage of installations (the risk of industries relocating to countries where greenhouse gas emissions are higher due to their electricity mix). The costs associated with conclusion and management of purchase obligation contracts are eligible for compensation in 2018, as they were in 2017. This concerns an annual amount of around €45 million. The amended French finance law for 2017 applied a downward adjustment to the amounts of compensation paid by the State for public service charges in 2017: these charges had decreased substantially due to a rise in electricity market prices between the July 2016 and July 2017 estimates for 2017, which automatically narrowed the differential between the purchase tariff and the market price for electricity. Public service charges borne by EDF The amount of expenses (excluding the annual contribution to repayment and associated interest) to be compensated to EDF for 2017 is €6,558 million, up slightly from 2016 due to higher wind and solar power output. The amounts received over 2017 (excluding the annual contribution to repayment and associated interest) totalled €7,065 million, higher than 2016, mainly as a result of the State’s decision to defer the €414 million compensation payment to EDF out of the “Energy Transition” budget item. The effects of this deferral on funding via the “Energy Transition” budget item for 2017 were adjusted through a budget carryover decision of 28 March 2017. A repayment schedule for EDF’s receivable corresponding to the accumulated shortfall in compensation, which amounted to €5,780 million at 31 December 2015, was set out in the ministerial decision of 13 May 2016, amended on 2 December 2016. Under this schedule the receivable will be fully repaid by 2020. On 22 December 2016 EDF securitised a portion of this receivable (€1.5 billion) through a State-approved “Dailly law” assignment to two groups of assignees. Consequently, since 1 January 2017 EDF has received a 73.6% share of payments made by the State in reimbursement of the receivable as set out in the repayment schedule. The remainder is paid directly to the assignees. At 31 December 2017, the State had paid €881 million of the €904 million due for 2017. The outstanding €23 million were paid on 2 January 2018. Finally, in accordance with decree 2016-158 of 18 February 2016 concerning compensation for public energy service charges, on 13 July 2017 the CRE published a decision recording the public service charges for 2016 (€6,345 million) and providing a revised forecast of charges for 2017 (€6,698 million) and a forecast of charges for 2018 (€7,390 million).

“Blue” tariffs Since 8 December 2015, in accordance with the NOME Law on organisation of the French electricity market (Articles L. 337-4 and L. 337-13 of the French Energy Code), the CRE has been responsible for sending the ministers for the economy and energy its reasoned proposals for regulated sales tariffs for electricity. If no objections are made within three months, the proposals are deemed to have been approved. The tariff change of summer 2017 followed this process, and by a decision of 27 July 2017 confirming the CRE’s proposal of 6 July 2017, the “Blue” regulated tariffs for residential and non-residential customers were raised by 1.7% from 1 August 2017. In preparing its tariff revision in 2017, the CRE undertook an audit of the allocation of EDF’s selling costs, to confirm proper application of the methodology ensuring that regulated sales tariffs did not bear development costs for market-price offers by EDF. This point was publicly confirmed in the CRE’s decision of 6 July 2017 containing its tariff change proposal. Appeals against the tariff changes of 2016 and 2017 have been brought before the Council of State by Anode and Engie. Legal and regulatory framework The compensation mechanism for public energy service charges (compensation des Charges de Service Public de l’Energie) results from a reform introduced by France’s amended finance law for 2015, published in the Journal officiel on 30 December 2015. Under the new legislative and regulatory framework, the public energy service charges (electricity and gas) were to be compensated via two State budget items included in France’s finance laws from 2016 onwards. The initial finance law for 2018 marks a continuation from 2017, defining the following charges for 2018: a special “Energy Transition” budget item of €7.2 billion, principally to ■ compensate for the additional costs associated with all contracts obliging the operators to purchase renewable energies and biogas, the annual contribution to repayment of the accumulated shortfall in compensation due to EDF, and reimbursement of advances to industrial operators who benefited from ceilings for their CSPE tax prior to 2016; a “Public Energy Service” item of €3 billion in the general budget to cover ■ solidarity charges borne by gas and electricity suppliers, costs associated with purchase obligations excluding renewable energies (essentially cogeneration), and the cost of applying the standard national tariffs to zones that are not connected to France’s mainland network. The interest on the accumulated shortfall to be repaid to EDF is also funded through the general budget; from 2018, the “basic necessity” rates for electricity and the “special solidarity” ■ rates for gas will gradually be phased out and replaced by an energy voucher system. The cost of this system will no longer be borne by EDF SA, although it has been budgeted by the State in the “Public Energy Service” programme. However, EDF will bear charges in 2018 due to the timing of invoicing for 2017 basic necessity rates. In 2018, this mechanism is funded as follows: the costs linked to the energy transition, which correspond to the subsidy ■ mechanisms for renewable energies, and the reimbursement of the past accumulated shortfall in compensation borne by EDF as measured at 31 December 2015, are registered in a special “energy transition” budget item created by the amended finance law for 2015. Law no. 2016-1917 of COMPENSATION FOR PUBLIC 3.2 ENERGY SERVICE CHARGES (CSPE)

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EDF I Reference Document 2017