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June 28 (Bloomberg) -- Electricite de France SA, Europe’s biggest power producer, will sell about 15 percent of its nuclear output to rivals after a law aimed at opening up the French market starts on July 1.
The legislation requires EDF to sell power from its 58 nuclear reactors to rivals including GDF Suez SA at a price set by the government of 40 euros ($57) a megawatt-hour until the end of the year. The company will sell 61.3 terrawatt-hours in the next six months to other power suppliers, France’s energy regulator said on its website. The price will rise to 42 euros a megawatt-hour next year.
“This improves our supply but it’s not enough,” said Patrick Massoni, head of investor relations at Poweo SA, which competes with EDF.
EDF rose 1.9 percent to 26.30 euros. The shares are down 14 percent since the start of the year.
The overhaul follows probes by European Union regulators into EDF’s dominance in the French power market almost four years after the Paris-based utility lost its monopoly. The European Commission is examining the law to ensure it complies with competition regulations.
“We are expecting some further explanation from the French government,” Amelia Torres, a spokeswoman for EU Competition Commissioner Joaquin Almunia, said by e-mail. Commission and French government officials have held talks over price, she said.
French Industry Minister Eric Besson has said the law will adhere to EU guidelines. The government maintains that the new law will keep prices on average 40 percent lower than elsewhere in Europe and allow EDF to invest in maintenance and nuclear reactor safety.
“They may take months to study its effects on the French market,” said Jean-Paul Tran Thiet, a Paris-based competition lawyer at White & Case, referring to the Commission.
GDF Suez, EDF’s biggest rival on the French market, has said that the prices for the wholesale power won’t allow “efficient” competition.
Purchasers of 61.3 terawatt hours of EDF’s nuclear output from July may include Direct Energie, GDF Suez SA and Poweo as well as EON AG, Iberdrola, Total SA and Vattenfall, according to information published on the web site of the French regulator.
These companies are included in a list of 32 published by the regulator as having signed a framework agreement with EDF for wholesale power purchases. A list of which companies are buying the power and how much won’t be published.
The sale this year of about two thirds of the maximum 100 terawatt hours of EDF’s nuclear output is “a pretty good start,” Tran Thiet said.
The volume is more than the 40 terawatt-hours sold by EDF last year under the so-called Tartam system of special rates for industry. This system will be eliminated under the new law.
“There will be no market opening from Nome this year, the government has kept a grip on the market,” said Ingo Becker, an analyst at Kepler Capital Markets in Frankfurt, referring to the law. “The whole idea is to deal with EDF’s rising capex in coming years.”
EDF’s 58 French nuclear reactors generated 407.9 terawatt hours last year, compared with total French electricity demand of 443 terawatt hours, according to the regulator. At the end of March, so-called alternative suppliers of electricity had captured a market share of just 5 percent from the more than 30 million households in France and about 16 percent by volume of business customers.
The French regulator ruled last month that EDF will charge rivals more for nuclear power next year than generation costs justify because of spending on safety measures needed after the meltdown at Japanese reactors following the March earthquake and tsunami. EDF is also facing higher maintenance costs as reactors age and spending to extend their operational lifetimes.
The government-set price takes into account spending on safety that the regulator “can’t evaluate,” the Commission de Regulation de l’Energie said.
The government sets the wholesale price and the regulator publishes a non-binding opinion under the new rules. The regulator said it “approved” the price of 40 euros a megawatt- hour set for July 1, even though its calculations indicate a price of 36 euros to 39 euros a megawatt-hour would be justified based on production costs.
--With assistance from Aoife White in Brussels. Editors: Stephen Cunningham, Will Kennedy
To contact the reporter on this story: Tara Patel in Paris at firstname.lastname@example.org
To contact the editor responsible for this story: Will Kennedy at email@example.com