France will keep its system of below-market electricity prices beyond 2010, defying pressure from European Union regulators, a person close to the administration of President Nicolas Sarkozy said late Friday.
The European Commission is investigating whether French power prices, which can be substantially lower than prices paid in other E.U. countries, are an illegal state subsidy to business.
"We do not foresee the disappearance of regulated tariffs in 2010," the person said. "If the Commission thinks that, it is mistaken."
The French government argues that its extensive use of nuclear power - the country relies on nuclear power for 80% of its needs - is a key advantage when gas, oil and coal prices are rising.
Sarkozy's government says France's past investment in building a fleet of 58 nuclear reactors, now assets of state-controlled Electricite de France SA (1024251.FR), must continue to benefit France's economy.
In a fully liberalized European energy market, power prices in France may rise as the country's nuclear advantage is diluted in a pool of largely fossil fuel-driven generating capacity. The country's competitive advantage from its large nuclear fleet could be watered down as barriers fall away.
At the same time, EdF could see revenues soar at no extra cost, if regulated rates rise or disappear.