French should not fund EDF investment errors-govt

PARIS, July 13 (Reuters) - The French public should not finance the foreign investment "mistakes" of state-run electricity company EDF (EDF.PA), a top advisor to President Nicolas Sarkozy said in remarks published on Monday.

EDF Chief Executive Pierre Gadonneix called last week for a 20 percent increase in state-set electricity tariffs, provoking outrage among government ministers.

Sarkozy advisor Henri Guaino said he was shocked by Gadonneix's comments.

"But EDF does not set the tariffs and if it is necessary that the prices reflect production costs, it would not be normal to make the French consumer pay for the mistakes of foreign investments," he told Le Parisien newspaper.

The group's debt stood at 24.5 billion euros ($34.1 billion) at the end of 2008, up from 16.3 billion a year earlier following the acquisition of British Energy.

Gadonneix said a tariff rise was necessary to stop the company building up debt.

He said tariffs would be 40 percent higher than they are if the state-owned group had been allowed to add the cost of inflation to its prices over the past 25 years.

French electricity tariffs are between 15 and 30 percent cheaper than in neighbouring European countries, but the government is keen to avoid hurting consumer budgets just as the economy is struggling to climb out of a slump.

The French press has speculated about the future of Gadonneix as the head of EDF following his comments.

But a source close to the government told Reuters on Friday that there was no basis to the speculation.

"The information according to which the Elysee (Sarkozy's office) has decided to change Pierre Gadonneix is unfounded," the source said. ($1=.7189 Euro) (Reporting by Anna Willard; Editing by David Cowell)