EDF Tumbles to Record Low on Overcharging Ruling: Paris Mover

Electricite de France tumbled to a record low in Paris after the country’s highest court, the Conseil d’Etat, ruled that the company overcharged customers for power distribution.

The shares fell as much as 6.2 percent, the biggest decline since July 20. They were 2.6 percent lower at 13.91 euros as of 1:04 p.m. in Paris, the lowest level since the stock began trading in November 2005. About 3.8 million shares changed hands, more than double the average daily volume in the last three months of 1.4 million.

The court ruling creates uncertainty about whether EDF will have to reimburse money to customers it charges to distribute power to households and businesses. The court determined yesterday that EDF’s power distribution arm ERDF overcharged customers by a total of 8.8 billion euros ($11.4 billion) since 2009, said Sipperec, the body that filed the complaint. It represents 100 communities in the Paris region that operate networks that deliver power to local customers.

“The ruling is good news for municipalities because there is a complete lack of transparency on our contracts,” Catherine Dumas, deputy director of Sipperec, said by telephone today. “We are defending the interests of network users.”

The same court decided earlier this year that GDF Suez SA, the country’s biggest gas supplier, can charge customers more to make up for rates set by the government that weren’t enough to cover costs.

Reimbursement Question

It is unclear whether or by how much ERDF will have to reimburse users of the power networks, Dumas said. The decision may also require changes to the way the distribution charges are calculated for the next four-year period starting in 2013.

ERDF said it has “no knowledge” of a possible repayment to customers. It said it is up to the energy regulator to decide on how it wants to apply the ruling. The regulator said today it’ll work on a new method of calculating EDF’s transport and distribution tariffs, known as Turpe. That method may be retroactively applied to the 2009-2013 period, it said.

French Energy Minister Delphine Batho said the government is studying its response.

“EDF considers the decision won’t have consequences on group results,” the utility said in a statement. The ruling doesn’t apply to regulated rates charged by EDF to its clients and “so won’t lead to client reimbursement by EDF,” it said.

EDF shares were the biggest decliners on the benchmark CAC 40 Index, which rose as much as 1.2 percent. The company’s 30-day volatility, a measure of stock swings, increased to 27.5 today, the highest since Aug. 31.

‘Big Dent’

“The amount of 8.8 billion euros represents a big dent in the group’s financial capacity and an adverse effect on cash flows,” Citigroup analyst Sofia Savvantidou said in a note.

The Conseil d’Etat canceled the rate charged by ERDF to consumers between 2009 and 2013 following the complaint by Sipperec. The rate represents about 33 percent of consumers’ power bills and is levied to cover costs of electricity transport and distribution.

ERDF municipal customers should be reimbursed 1.9 billion euros for each of four years it overcharged for “largely non-existent” financing costs, according to a statement from Sipperec. Another 300 million euros for each of four years should be returned by ERDF in charges for investments that haven’t been carried out, the group said.

The total of 8.8 billion euros in surcharges is for some 1,200 contracts ERDF has with municipalities across France, Dumas said.

The court ruling comes amid talks between EDF and the government over a tax known as the CSPE that mostly pays for subsidies for renewable energy production. EDF reported Nov. 13 a shortfall it carries on its accounts for the CSPE will balloon to 5 billion euros by the end of the year. Talks on possible changes to the tax are continuing, Batho said yesterday.