The electricity market in France comprises the organizational forms of the electricity production and marketing sector, which has been undergoing a process of economic liberalization since the late 1990s.
Following on from a public monopoly supplying electricity at administered rates, the creation of the electricity market in France spans a quarter of a century, from the preparatory work of the European Commission in the 1980s to the law on the new organization of the electricity market (NOME law) in December 2010.
Key legislative changes have included the restructuring of the state-owned company Électricité de France (EDF). These changes ended EDF's monopoly on electricity generation and supply, introduced partial privatization by opening up its capital, and facilitated access to the transmission network for other market participants.
Additionally, new regulatory institutions were established, such as the Commission de Régulation de l'Energie (CRE) and the Médiateur National de l'Energie (National Energy Mediator), to oversee the sector and address consumer issues. The overall organization of electricity markets has also been increasingly aligned with European Union regulations.
History The Energy Code, established in 2011, consolidates existing laws related to energy across all its forms. Since its creation, the Code has been continuously updated to address various issues, including consumer protection, securing electricity supply, and overseeing new technologies.
In October 2012, the Treaty on the Functioning of the European Union (TFEU) ruled that energy and trans-European energy transport networks would henceforth be a shared competence between the European Union and its member states.
Public monopoly from 1946 to 1997
France, on the eve of EDF's nationalization, electricity was generated by 86 thermal power plants and 300 hydroelectric plants, owned by 54 and 100 private companies respectively. Transmission networks were shared between 86 companies. As for electricity distribution, 1,150 companies managed the market.
Law no. 46-628, passed on April 8, 1946 on the nationalization of electricity production, transmission, distribution, import, and export, was primarily intended to promote economic reform by “[ousting] the great economic and financial feudalities from the direction of the economy [and] returning to the nation the great means of monopolized production, the fruits of common labor, energy sources and subsoil riches”.
EDF was given financial autonomy, as well as technical and commercial independence. For its financial and accounting management, it followed the rules used in industrial and commercial companies and was subject to taxation.
Since then, the management of national and distribution services has been conducted in such a way as to meet all operating, capital, and investment expenses.
In addition to EDF, the 1946 nationalization law recognized the right of communes wishing to do so to retain a role in the public distribution of electricity, by maintaining the status quo of distribution networks operated by public utilities.
In 2023, some 140 local distribution companies (ELD) were responsible for distribution in around 5% of France, in areas not served by Enedis.
During the period of EDF's monopoly, the roles of distribution and commercial supply to end customers were unified.
In short, EDF was responsible for generation, transmission on the main grids, distribution and commercial supply to end customers, while local electricity distribution companies, where present, were responsible for local generation, distribution, and commercial supply. EDF was also responsible, under government supervision, for the forward-looking development of electricity production and consumption.
From 1946 to 1997, there were no significant legislative changes.
1980 to 1996: Legislative preparation by the European Community As early as the 1980s, the European Commission was studying the possibilities of opening up the electricity market to competition, for the following reasons:
the competitive imperatives of the European common market enshrined in the 1957 Treaty of Rome; the separation in Community law between, on the one hand, the missions of service of general economic interest (SGEI) and, on the other, the operators entrusted with these missions.
During this period, while Great Britain opened up the electricity sector to competition with the Electricity Act 1989, with the aim of bringing supply prices closer into line with production costs, stimulating innovation and obtaining an optimal production fleet, France, relying on the fact that an exception to the applicability of competition rules was allowed in the event of incompatibility with the fulfilment of a public service mission, maintained an integrated monopoly, preventing any new entrant from developing competition in electricity production and marketing. This was interpreted as a barrier to intra-Community trade.
In 1989, the Commission published several reports on the transparency of energy prices for industrial consumers. In addition to price transparency, these reports aimed to identify any unauthorized state aid.
In the early 1990s, the European approach was unexpectedly strengthened by the successful opening up of the UK electricity market to competition, which was accompanied by falling prices on wholesale markets, whetting the appetite of European industrialists who saw cost-cutting opportunities.
This led to Directive 90/377/EEC on the transparency of electricity prices charged to large industrial consumers and Directive 90/547/EEC on the transit of electricity through grids in the Member States.
Since the Amsterdam Treaty of 1997, the European Commission has no longer considered services of general economic interest as a possible exception to the applicability of competition rules.
Consequently, considering that the preliminary conditions for opening up a European electricity market had been met, the Parliament and Council of the European Union adopted Directive 96/92/EC in December 1996 to organize the unification of the internal electricity market by giving consumers the right to choose their supplier.
This directive also defines the essential principle for putting generated electricity onto the grid: economic precedence or merit order, as “merit order” is very commonly used. This principle means that, to meet demand, generating facilities are called according to the increasing cost of the megawatt-hour produced; the higher the cost, the less the generating facility will be called. And, for a given time slot, all the electricity produced, whatever its production cost, is sold at the marginal cost, which is the highest cost. This principle has been maintained in successive changes to the directive until September 2023.
However, in October 2023, the Council of the EU proposed that it be replaced by a system of sharing the risk of wholesale price variations between producers and member states. In November 2023, this proposal remains to be approved by the European Parliament.
Directive 96/92/EC and its counterpart on the internal market for natural gas make up the commission's first energy package.
2000 to 2006: Transposition of European directives To align with the aforementioned EU directives, France undertook significant legislative reforms in the electricity sector, beginning with Law 2000-108 of February 10, 2000, which aimed at modernizing and developing the public electricity service. This law:
defined the notion of “public electricity service”, previously implicit, as having “the purpose of guaranteeing the supply of electricity throughout the national territory, in the public interest”, and explain the related missions, the operators responsible for them, the involvement of public authorities, the methods for setting electricity tariffs for customers not eligible for market offers, and the contributions of electricity producers to the costs attributable to public service missions; defined the principles for programming and issuing operating authorizations for production facilities, the organization of calls for tenders for the construction of new facilities, the terms and conditions of EDF's obligation to purchase small-scale production, and the opportunities granted to municipalities to build small-scale facilities and sell their production; defined the management and missions of the public electricity transmission service, as well as the terms and conditions of access to this transmission network. EDF RTE (Réseau de transport d'électricité) was designated as the operator; maintained the existing organization for the public distribution of electricity to end customers. EDF and the 150 or so non-nationalized distributors, as well as the concession-granting authorities, kept their roles unchanged; defined the conditions for opening up to competition, eligibility, and choice of supplier; defined the conditions for direct network access by new players; imposed the separation of generation, transmission and distribution accounts in EDF's internal accounting system; created a regulatory authority, the Commission de régulation de l'électricité (CRE), and define its missions and powers; authorized EDF to extend its traditional activities to others that contribute directly or indirectly to them - in 2023, the EDF Group had holdings in 263 companies in 12 countries- with the exception of domestic and industrial installations, and authorize EDF to carry out any activity abroad.
In addition, the consumption eligibility thresholds, set in accordance with Directive 96/92/EC, authorizing access to the competitive electricity market, met with great success and were rapidly lowered in member states, encouraging the commission to accelerate this opening-up by positioning new thresholds closer in time.
A second “energy package” was therefore adopted by the Commission on June 26, 2003:
Directive 2003/54/EC opening up the electricity markets to new suppliers and giving all consumers the freedom to choose their suppliers; Regulation (EC) no. 1228/2003 on conditions for access to the network for cross-border exchanges in electricity.
In France, Law 2004-803 of August 9, 2004, on the public electricity service and electricity companies implemented several key reforms to align with European directives:
assigns public service missions to EDF and local distribution companies (ELD). The possibility of EDF and GDF sharing common services is confirmed. Under article 5, the creation of a joint service is compulsory in the distribution sector for the construction of facilities, project management, network operation and maintenance, metering operations and other tasks relating to these activities; decides to split EDF into two separate companies, one responsible for generation and supply, EDF in this case, and the other for electricity transmission, Réseau de transport d'électricité (RTE), created in 2000. RTE was transformed into a subsidiary of the EDF Group, while its capital remained wholly owned by public bodies, including EDF; authorizes RTE to manage other networks in France and abroad; transfers ownership of EDF's electricity transmission assets to RTE; requires companies distributing electricity to more than 100,000 customers to set up a department to manage this distribution; transforms EDF into a limited company and opens up 30% of its capital.
Law 2006-1537 of December 7, 2006 on the energy sector amends the above-mentioned laws of 2000 and 2004, as well as various articles in the local authority, consumer affairs, labor and employment codes:
establishes the principle of eligibility for all end consumers, including domestic consumers; establishes a national energy ombudsman responsible for recommending solutions to disputes between consumers and electricity suppliers, and helping to inform electricity consumers of their rights;