EDF_REGISTRATION_DOCUMENT_2017

1.

PRESENTATION OF EDF GROUP Legislative and regulatory environment

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. On 2 February 2017, Enedis filed a request with the Council of State for the annulment of these two CRE decisions. On 3 February 2017, EDF, acting as a shareholder of Enedis, also filed a request for annulment with the French Council of State against the same deliberations by the Energy Regulation Commission (CRE). 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 unamortized 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. The CRE shall resume a TURPE deliberation taking effect on that date. 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 decision of 26 October 2017. 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 2017, the deferred amount is +€645 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 2017, pursuant to the accounting standards in force on this date). European legislation 1.5.4.1 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 GAS MARKET REGULATION 1.5.4

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 (UE) 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 3.5.4 “fight against energy poverty contribution”). 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 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.

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EDF I Reference Document 2017