The Court of Auditors persists and signs. After having issued a first report in 2018 criticizing the financing conditions under which the Linky smart meters had been deployed, the financial jurisdiction is publishing, this Friday, a new so-called “follow-up” report where it notes that, six years later, nothing has not changed. And this, to the detriment of consumers.
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“We do not question the Linky program, but we believe that it could have taken place under different and less expensive conditions for the consumer given the level of risk associated with this project”we summarize at the Cambon Palace.
In detail, the financial magistrates consider that the manager of the electricity distribution network Enedis, who carried out the project, benefited from very advantageous remuneration, and regret that this has been maintained over the last few years in despite adjustment requests addressed to the Energy Regulatory Commission (CRE). Which, over the period from 2016 to 2023, would have generated additional costs for consumers of more than 700 million euros. While users will suffer an additional cost of 785 million euros over the period 2022-2029. A total of almost 1.5 billion euros.
A much higher rate of pay than normal
To understand this, we must return to the Enedis remuneration model. In France, the distribution of electricity is paid by the consumer via the Tariff for use of the public electricity network (Turpe), one of the three components of the electricity bill, alongside taxes and the supply price. of the kilowatt hour. This Turpe is not set by the market, due to the monopoly situation in which Enedis finds itself, but by the CRE. Following contradictory exchanges with the distribution network manager, the energy regulator sets the level of authorized expenditure, which is reflected in the Turpe.
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But beyond the budgetary dimension, the CRE also sets the rate of return on the capital committed by Enedis as part of its investments. Remuneration which is also reflected in the Turpe. And it is precisely on this point that the magistrates are ticking. While a single rate of remuneration must be applied to all Enedis assets, the Linky meter benefited from a different rate of remuneration and, above all, much more remunerative than the other assets. This amounts to 7.25% compared to 4% for the rest of the base. A difference of more than three points that Enedis justifies, even today, by the risky nature of the program, given the scale of the system (to date some 34 million meters have already been deployed).
“In the house, we consider this economic risk to be low. The doctrine therefore consists of pushing Enedis’ remuneration towards risk-free remuneration rates”retort the magistrates. According to their calculations, this very advantageous rate from which the manager benefited would have represented an additional cost for consumers of 311 million euros over the period from 2016 to 2023.
“A public service company is not there to make money”
And the bill is expected to increase further over the years since these financing conditions have been validated over the entire theoretical lifespan of smart meters, i.e. until 2041. Which also deviates from common law, because the Turpe components are usually defined for a period of five years, then readjusted periodically.
That's not all. In addition to this advantageous remuneration based on regulated assets, Enedis also benefited from so-called incentive remuneration. In other words, the manager, 100% subsidiary of EDF, received bonuses as he achieved different objectives, such as respecting the initial budget and the deployment schedule.. “What we observed in 2018 was that this incentive regulation was quite advantageous while the objectives were easy to achieve”point out the magistrates.
At the time, the Court of Auditors asked the regulator to change this remuneration mechanism, in vain. Result, “Enedis received more than 400 million euros in additional remuneration for this purpose” over the period 2016-2022, the report indicates. “A utility company may have reasonable remuneration, but it is not there to make money”we get annoyed at the Palais Cambon.
“Enedis played the role of banker”
Finally, the financial jurisdiction criticizes the CRE for not having changed the so-called “tariff deferral” mechanism, put in place in order to match the costs linked to the deployment of fluorescent yellow meters, with the gains made thanks to the generalization of the latter. “It was a political measure which assumed that the Linky program was going to cost money, but that it would only produce positive effects later. There was therefore no question of consumers paying a surplus linked to Linky as long as the gains generated were not observable”we trace. A way to improve the acceptability of the device at a time when connected boxes gave rise to strong opposition relating to the protection of personal data.
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The fact remains that this promise to protect users' purchasing power was only short-lived because this delay entails a cost which, ultimately, will weigh on users' bills for several years. In fact, this mechanism led Enedis to finance investments without immediately receiving the corresponding revenue. “It’s as if Enedis had played the role of banker by advancing the capital”the magistrates schematize. And this, again, in return for remuneration, considered high, with a rate of 4.60%. The total cost of the operation is thus estimated at 785 million euros. A sum which will be passed on to the Turpe from 2022 to 2029.
“We are not criticizing the choice of implementing a deferred mechanism, but the level of the associated rate of remuneration”, specify the magistrates. According to the Court of Auditors, Enedis could have borrowed at a much lower rate from a financial organization given its monopolistic and therefore low-risk profile.
Warning on future investment programs
Why did the energy regulator not follow the recommendations of the financial jurisdiction? “Calling into question the reimbursement of sums owed to Enedis would have led to an economic imbalance for Enedis, which had to postpone covering the costs associated with the deployment of Linky over time”justifies the CRE today in a response addressed to the Court of Auditors. More generally, the regulator's argument is based on the legal uncertainty vis-à-vis investors that any modification of the financing conditions would have generated a posteriori.
For its part, without writing it in black and white in its official response, Enedis denies the fact of having made profits within the framework of this industrial program. In the documents sent to the Court of Auditors, the manager presents, curiously, a neutral operation with an amount of earnings estimated at zero euros.
If none of the recommendations made by the Court of Auditors in 2018 have been followed, the magistrates hope that the exceptional treatment from which Enedis was able to benefit will not constitute a precedent. And this, while the distribution network manager and that of the transport network are preparing to invest some 200 billion euros in their networks by 2040. One thing is certain, the financing conditions of these two programs unpublished material will be scrutinized.
