Ofgem offers to reduce costs of Hinkley Point transmission link

15 October 2019 (Last Updated July 15th, 2020 23:34)

UK gas and electricity markets regulator Ofgem is planning to offer £637m to National Grid Electricity Transmission (NGET) for the construction of a transmission link for the new Hinkley Point C nuclear reactor.

Ofgem offers to reduce costs of Hinkley Point transmission link
Hinkley Points A and B Credit: Richard Baker

UK gas and electricity markets regulator Ofgem is planning to offer £637m to National Grid Electricity Transmission (NGET) for the construction of a transmission link for the new Hinkley Point C nuclear reactor.

Initially, NGET initially requested for £717m, but Ofgem said that consumers will save money as the new plan would reduce the funding by £80m.

The latest move comes after Ofgem rejected £40m in ‘risk funding’, which NGET included in the upfront cost of the link.

Ofgem will use its network price control framework, which will enable NGET to fund the investment and recover the cost from consumers’ energy bills over a period of 45 years.

However, the regulator noted that NGET may seek additional funding to cover certain risks including extreme weather or widespread flooding during the construction period, even after the company efficiently manages them and the risks take place.

Ofgem said that it does not intend to allow the inclusion of additional costs for the new ‘T-Pylons’ used on the route.

It further added that NGET could not justify all these costs or demonstrated that they represent value for money for consumers.

Ofgem said in a statement: “Most of this investment will be covered by RIIO2, the next network price control which takes effect from March 2021 to 2026 for electricity transmission, and will deliver lower rates of return for investors, lower capital costs and significant savings for consumers.”

Last July, the National Grid received approval from Ofgem to build a power grid upgrade connecting EDF Energy’s Hinkley Point C nuclear power plant in Somerset, UK.