The two sides agreed on 70 euros per megawatt hour (MWH) as a reference level for power prices, the source said, cautioning that details of the deal are still being finalised.
The negotiations aimed to find a compromise between EDF, which is eager to maximise revenues to fund investments, and the government, keen to keep electricity bills for French households and businesses as low as possible.
EDF declined to comment.
The preliminary deal sets out mechanisms that would protect consumers if power market prices rise above 110 euros/MWH, the source said, adding that the deal also includes clauses that would provide a price guarantee for EDF.
The 70 euros/MWH agreed reference price level is close to EDF's nuclear production costs. The nuclear power produced by the company provides 70% of France's electricity.
The agreement would allow the government to tax EDF's extra revenues at 90% if prices surpass 110 euros/MWH, in order to offset the impact on consumers. It would also enable a review of conditions in case of market fluctuations to safeguard the 70 euro level for EDF, the source said.
French wholesale electricity prices are still above 100 euros/MWH, after climbing to 1,200 euros during last year's energy crisis.
A final agreement should be officially announced on Tuesday after a meeting between Finance Minister Bruno Le Maire, Energy Transition Minister Agnes Pannier-Runacher and EDF chief Luc Remont.
That meeting will work out the final details on price thresholds and tax rates between the reference level and the upper limit, the source said.
Negotiations between the two sides were so fraught that at one stage they raised questions about the future of EDF chief Luc Remont, who was appointed by President Emmanuel Macron a year ago to turn around EDF.
The group ended 2022 with a 18 billion-euro loss and almost 65 billion euros of net debt, hurt by a record number of reactor outages that coincided with soaring energy prices in the wake of Russia's invasion of Ukraine.
With its output at a 30-year low, EDF was forced to buy electricity on the market to supply customers. The government, meanwhile, imposed a cap on electricity prices, leaving EDF selling power at a discount.