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EDF's Spending Plan for French Nuclear Reactors Face Government Scrutiny
Electricite de France SA, Europe’s biggest power generator, is facing demands to justify ballooning cost estimates for extending the lives of French nuclear reactors as the government opens the market to competitors.
“Many decisions will hinge on” the cost estimates, including the rates rivals will pay for EDF electricity supplies, Pierre-Franck Chevet, the top official at France’s Energy Ministry, said in an interview. “We will need some estimates to set the rates” next year, he said.
EDF will have to spend about 600 million euros ($750 million) on each of its 58 reactors to keep them in service for longer, according to Chief Executive Officer Henri Proglio. That’s 50 percent more than an estimate given earlier this year. The utility will have to fork out almost 35 billion euros in 20 years to keep aging plants in working order, the CEO has said.
Cost estimates have taken on greater urgency as lawmakers study a planned electricity market law that may force EDF to sell about a quarter of the power from its nuclear reactors to GDF Suez SA and others. The law, in the Senate after approval by the National Assembly last month, follows probes by European Union regulators into EDF’s dominance in the French market.
While the work on EDF’s reactors won’t start until the next decade, the government needs rough cost estimates to calculate the wholesale power rates the utility can charge rivals on what may be as much as 100 terawatt-hours a year. The price will be set by the government in consultation with the energy regulator after the law is passed.
Explain Costs
The ministry has ordered state-owned EDF to spell out costs to upgrade the French plants, which are on average 24 years old, Chevet said.
Extending French reactor operations will be “one of the most important issues for the next two or three years,” Chevet said. “I do not know the basis of the 400 million euros or the 600 million euros at this stage.”
EDF’s 30-year-old French nuclear reactors are now undergoing inspections by the Autorite de Surete Nucleaire, France’s nuclear safety watchdog, to determine whether they can operate for another decade.
Keeping them going for more than four decades would be cheaper than building new ones, such as the EPR model the utility is developing for 4 billion euros in Flamanville, Normandy.
Precise Information
“We want this examined in-depth,” Chevet said. “It’s not simple, there are a lot of technical issues.” Getting more precise information could take at least a year and will depend on how long EDF wants to operate the reactors.
Proglio has described the proposed power law as “expropriation” and warned against the “pillage” of the utility by setting the price too low. At a Senate hearing last month, Proglio said the minimum price should be 42 euros a megawatt hour, which should be “progressively” raised to 45 euros a megawatt-hour to include costs of extending the lives of French reactors.
French regulated rates for households currently assume EDF base power supply costs of about 34 megawatts an hour. EDF’s rivals say that is about where the wholesale price should be set to enable them to compete on that market.
GDF Suez, the former French gas monopoly which operates seven reactors in Belgium, has estimated costs to extend the lifetime of its reactors at about 400 million euros each, although this has to be evaluated plant by plant and depends on the extension, Chief Executive Officer Gerard Mestrallet said this week following a hearing at the French Senate.
Industrial Challenge
“Extending the lives of nuclear reactors is an industrial challenge and it’s to be expected that the wholesale price will permit this when the time comes, and I repeat when the time comes,” Mestrallet told lawmakers.
Making rivals pay up front for the costs isn’t right, he said. EDF’s share price could rise or fall by 1.50 euros for each year the average lifetime of the reactors is extended or reduced, according to Louis Boujard, an analyst at Aurel BGC in Paris.
“EDF must come up with a solid case,” to justify the cost estimates, Chevet said. “The costs depend a lot on the extent of the extension that is envisaged.”
To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net
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