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French Industry May Face Energy Rationing, PM Warns

·4 min read

(Bloomberg) -- French Prime Minister Elisabeth Borne urged businesses to cut energy use or face possible rationing this winter if Russia halts gas deliveries.

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“It’s urgent to stop any energy consumption that isn’t indispensable immediately,” Borne said Monday in a speech to business leaders at a conference near Paris. If not “there could be brutal gas outages overnight and serious economic and social consequences,” she said, adding that “companies would be the first hit” by any rationing.

The prime minister urged the government and businesses to work together on plans to lower energy use to avoid shortages and blackouts. She pledged to detail various scenarios at the start of October when she has a clearer view of the risks and there has been progress on energy-saving plans.

The French government and its European neighbors are seeking to shield consumers and businesses from a surge in energy prices caused by cuts to Russian gas supplies and a much higher than usual number of outages at Electricite de France SA’s aging nuclear reactors. President Emmanuel Macron last week warned French citizens they faced “the end of the time of abundance.”

Borne said one possibility was to create a new market for rights to consume energy. She also hinted that the government might take measures to help companies that would be “too strongly impacted” by potential rationing.

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While France “is less exposed than other European nations” to Russian gas, “let’s not believe for one second that our nation would face no risk,” Borne told the Medef business conference.

“We already know that we have less gas this winter than in previous years,” she said. “Our nuclear power plants are facing difficulties, and a quick restart of reactors that are offline is key to avoid cuts.”

More than half of EDF’s 56 atomic reactors in France -- which typically account for more than two-thirds of the country’s electricity production -- are currently halted, including a dozen for checks and repairs concerning corrosion cracks on key pipes that have been progressively revealed since December.

The first repairs are progressing well, though it’s taking time because of a lack of trained employees for such “heavy works” in a radioactive environment, EDF Chief Executive Officer Jean-Bernard Levy said on a panel discussion at the Medef event.

“We’re doing all we can to avoid” power cuts for the coming winter, Levy said. A “handful” of the company’s reactors are currently voluntarily halted to keep them available for the colder months ahead, he said.

With more than 90% of its gas storage currently full, France should have enough of the fuel to cope with a winter with average temperatures, Engie Executive Vice President Claire Waysand said on the same panel.

The utility is holding talks with Algeria’s Sonatrach as part of its diversification strategy away from Russian supplies, though these new medium- and long-term contracts with the North African nation wouldn’t kick in this winter, she said.

The French government has already spent more than 25 billion euros ($25.1 billion) on a so-called energy-tariff shield to protect consumers from surging oil and natural gas costs by capping price rises. It plans to spend at least 20 billion euros more on tax cuts, increased pensions and other measures as part of an anti-inflation package adopted earlier this month. It’s also subsidizing fuel at the pump.

Macron has asked his government to draw up a plan on how to tame energy consumption in the coming weeks. Borne added that the administration would also unveil a new plan to curb emissions by year-end.

Borne has said that the government would keep protecting French citizens from energy-price hikes and add targeted measures for poorer households. Still, she has reiterated Macron’s goal to bring the deficit below 3% of GDP by the end of his mandate in 2027.

On Monday, Borne also repeated a target to reach “full employment,” which Macron’s advisers have described as around 5% unemployment. The government will soon propose a bill to lower protections for unemployed people when joblessness is low, she said.

(Updates with comments on energy supply from Engie and EDF executives)

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