This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 PARIS 002733 
 
SIPDIS 
 
SENSITIVE 
SIPDIR 
 
STATE FOR EUR/WE; OES; STAS; ISN; EB/ESC, AND EB/CBA 
USDOC FOR 4212/MAC/EUR/OEURA 
DOE FOR ROBERT PRICE PI-32 AND KP LAU NE-80 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EIND EINV PREL PGOV FR
SUBJECT: FRANCE: ENERGY SECTOR UPDATE 
 
Refs: (A) Paris 2663 
 
(B) Paris 1697 
(C) Paris 1556 
(D) Paris 1138 
(E) Paris 0762 
(F) Paris 0169 and previous 
 
¶1. (U) This is another in a series of occasional updates on the 
French energy sector.  Feedback is welcome to help us make this 
product as useful as possible for our inter-agency USG audience. 
 
Contents: 
-- De Ladoucette named head of French Energy Regulatory Authority 
(para 2) 
-- GOF Supports Closer Transatlantic Cooperation on Energy Security 
(para 3) 
-- Franco-German Nuclear Reactor Project Falls Behind Schedule, Yet 
France May Order Another (para 4) 
-- Natural Gas and Electricity Utilities to Raise Prices, Risking 
Public Backlash Against Privatization (para 5) 
-- French Industry Minister Concerned that Iran Sanctions May Harm 
Total (para 6) 
-- GOF Investing in R&D to Reduce Energy Consumption (para 7) 
 
¶2. (U) De Ladoucette named head of French Energy Regulatory 
Authority:  President Chirac recently appointed Philippe de 
Ladoucette Chairman of the Energy Regulatory Commission (CRE) for a 
period of six years, effective April 18, replacing Jean Syrota, 
whose term expired on March 23.  The 58-year-old de Ladoucette is a 
PhD in economics and sociology with a postgraduate degree in 
urbanism and land development.  He was technical advisor to then 
French Industry Minister Alain Madelin in the mid-1980s and then GOF 
representative to the Channel Tunnel General Secretariat from 1988 
to 1993, before becoming Deputy Chief of Staff to Alain Madelin from 
1993 to 1994, when he was Minister of Small Business and Economic 
Development.  De Ladoucette has been CEO of coal utility 
Charbonnages de France since 1996, and also served as CEO of the 
company's subsidiary electricity producer SNET (Societe nationale 
d'electricite thermique) from 1996 to 2000.  Also well-known in 
French energy sector circles, Philippe de Ladoucette's wife Vera 
heads the Paris office of Cambridge Energy Research Associates.  The 
CRE is made up of seven members: two are appointed by the French 
Government (including the Chairman), two by the President of the 
French National Assembly, two by the President of the Senate and one 
by the President of the French Economic and Social Council. 
Established in March 2000, the mission of the CRE is to ensure the 
smooth operation of electricity and natural gas markets without 
discrimination, cross-subsidies or obstacles to competition. 
 
¶3. (SBU) GOF Supports Closer Transatlantic Cooperation on Energy 
Security:  EB Assistant Secretary Tony Wayne met recently with GOF 
energy policy officials to discuss potential areas for bilateral and 
US-EU cooperation to improve energy security.  GOF officials 
responded enthusiastically, emphasizing the need to maintain 
pressure on Russia to open its own and gas markets and, in 
particular, to accept the transit protocol of the Energy Charter 
Treaty.  They also saw great potential for collaboration on outreach 
to other countries, such as Ukraine, to help them reduce energy 
consumption by improving efficiency, as well as outreach to producer 
countries to encourage them to use part of their windfall profits to 
help developing countries cope with rising oil and gas prices.  (For 
more details, see Paris 2663.) 
 
¶4. (U) Franco-German Nuclear Reactor Project Falls Behind Schedule, 
Yet France May Order Another:  According to news reports, French 
nuclear powerhouse Areva has admitted that the construction of the 
first nuclear reactor to be built in the European Union since the 
early 1990s is running nine months behind schedule following the 
detection of several faults.  The three billion euro Olkiluoto 3 
nuclear power project in Finland is supposed to be finished in 2009, 
but delays with manufacturing components and preparing the site mean 
that it is not likely to be in full operation until 2010.  French 
group Areva and Siemens of Germany are building the new 1600MW 
pressurized water reactor on a fixed-price contract.  It will be one 
of the biggest nuclear plants in the world, and the first to test 
out the European Pressurized Water Reactor (EPR) technology. 
Governments and energy companies around Europe are closely watching 
the progress of the Areva-Siemens flagship project, particularly 
Electricite de France (EDF), which says that the EPR plant it 
ordered in 2004 for Normandy should begin operating in 2012.  Rumors 
have recently been circulating in the French press that in the 
coming weeks PM de Villepin will announce plans for a second EPR in 
France, a move that would show the GOF is responding to high oil 
prices. 
 
¶5. (U) Natural Gas and Electricity Utilities to Raise Prices, 
Risking Public Backlash Against Privatization:  The GOF will let Gaz 
de France (GDF) raise its average household gas prices by just 5.8%, 
even though this increase has received an unfavourable ruling from 
France's energy regulator, CRE, and is well below the 8.1% requested 
by GDF.  The increase will come into effect on May 1.  The CRE 
regulator refused to endorse the 5.8% increase, because it did not 
fully compensate GDF for the recent surge in supply costs.  However, 
the regulator's views are non-binding, and the GOF, anxious to avoid 
any measures that might dampen consumer spending or economic growth, 
reportedly plans to stick with the 5.8% hike.   The other 
state-controlled utility, Electricite de France (EDF), has asked the 
government for permission to raise prices by 1.7%, in line with the 
expected rate of inflation.  EDF has not raised household prices 
since 2004.  Unlike telecom privatization, which saw dramatic 
reductions in consumer prices as a result of increased competition, 
the recent partial privatizations of electricity and gas monopolies 
EDF and GDF have occurred in the unfortunate context of rising 
global energy costs.  In a country suspicious of profit-driven 
capitalism, many fear that French consumers will blame privatization 
for these price hikes. 
 
¶6. (U) French Industry Minister Concerned that Iran Sanctions May 
Harm Total:  According to recent news reports, GOF French Industry 
Minister Francois Loos said on April 24 that he hopes French oil 
major Total, which has a significant presence in Iran, will not be 
harmed by any potential economic sanctions over its disputed nuclear 
program.  "Total is working there," he said on the margins of the 
International Energy Forum. "I hope they will continue in good 
conditions of security."  He said France continues to hope for a 
diplomatic solution to the impasse over Iran's efforts to enrich 
uranium.  Loos said France is urging Iran to "to reassure the 
international community," saying it's up to the U.N. what happens in 
terms of sanctions.  "I hope the results of sanctions don't affect 
Total," he said.  Meanwhile, Iranian sources have reportedly 
speculated that economic sanctions, if imposed, would not be applied 
retroactively to impact companies already active in the country. 
The big concern of these companies, however, would be their ability 
to get spare parts and other needed supplies. 
 
¶7. (U) GOF Investing in R&D to Reduce Energy Consumption:  On April 
25, President Chirac unveiled six major high-tech projects selected 
for a total of 600 million euros in GOF funding through the French 
Agency for Industrial Innovation (AII).  Three of the six projects 
focus on energy: (1) a new Franco-German advanced, low-energy subway 
(light rail) system called "NeoVal", built by Germany's Siemens and 
France's Lohr; (2) a low-energy housing project by French firm 
Schneider Electric called "Homes" that aims to slash household 
electricity use by 20%; and (3) a hybrid diesel-electric car, 
already under development by the French carmaker PSA Peugeot.  The 
AII was set up by Chirac last year to increase funding to targeted 
research and development efforts.  Its current budget of 1.7 billion 
euros is designed to cover half of the selected companies' costs in 
the form of subsidies and reimbursable advances, with companies 
expected to match the state funds. 
 
Please visit Paris' Classified Website at: 
http://www.state.sgov.gov/p/eur/paris/index.c fm 
 
Stapleton