France's EDF terminates ARENH power contracts with Total, Gazel, Alpiq

London — France's EDF has terminated regulated power supply contracts with Alpiq, Gazel and Total Direct Energie under the ARENH mechanism following a court ruling in May, the state-owned utility said June 2.

The Paris Commercial Court ordered EDF to accept suspension of the contracts, saying the impact of the coronavirus pandemic on electricity demand met force majeure conditions.

EDF has rejected the existence of "force majeure" conditions relative to the contracts and has filed an appeal, it said.

"Faced with this decline in electricity consumption, some suppliers decided to revoke their contractual commitments, citing force majeure to reduce the volumes bought in November as part of the ARENH contract," it said.

French energy regulator CRE and the Council of State court initially rejected force majeure claims by the suppliers.

Above ARENH

Under ARENH, EDF is required to sell 100 TWh of its annual nuclear output to domestic suppliers at Eur42/MWh.

French spot power prices fell below Eur20/MWh in April and May as electricity demand slumped by over 15% year on year.

Forward prices, however, have risen sharply since mid-April after EDF cut its 2020-22 nuclear supply forecasts.

The year-ahead baseload contract, which in February dipped below Eur42/MWh, rebounded to a 2020-high at Eur47/MWh May 26 and settled on June 2 at Eur45.30/MWh, EEX exchange data show.

Q3 base last traded at Eur31.50/MWh and Q4 base at Eur58.50/MWh, bringing the average forward power contract for the second half of 2020 to Eur45/MWh, EEX data show.

France is reviewing the ARENH mechanism amid a wider restructuring of EDF that may include splitting the company's nuclear business.