The European Commission has initiated a probe into the state-aid case for the proposed Hinkley Point C nuclear power plant investment contract.
The commission will assess potential breaches of state-aid regulations for the contract, which guarantees a subsidy of £92.50/MWh to Electricite de France's (EDF) Hinkley Point C for 35 years, and will also examine loan guarantees for the plant.
In October 2013, the UK Government and EDF have reached commercial agreement on the key terms of the proposed investment contract for Hinkley Point C.
The agreement has set a strike price of £89.5/MWh fully indexed to the consumer price index, and that price benefits from an upfront reduction of £3/MWh, assuming that EDF would share EPR reactors costs across Hinkley Point C and Sizewell C.
However, the UK has been denying the allegations and is justifying that the financial support is a subsidy that is much needed for the plant and the industry to combat climate change and ensure energy security.
The UK is also arguing that the funding for the £16bn should be viewed as 'permitted state-aid' instead of seeing it just as a 'state-aid'.
The Guardian reported on a speculation that the commission has come to a conclusion that the subsidy for Hinkley Point C is unfair, but uncertainty prevails over the changes or sanctions it may impose on the UK.
Meanwhile, EDF Energy said that it is committed to cooperating with the commission and interested parties during the course of the investigation.
EDF Energy claims that the probe will demonstrate the UK's recently announced Electricity Market Reform that attracts the investment needed for the country's low carbon energy future at the best possible price for consumers.
EDF Energy had filed the proposal with the Department of Energy and Climate Change (DECC) in October 2011 and received a development consent order in March 2013.
The project will feature two UK EPR nuclear reactors units, two turbine halls, cooling water infrastructure, fuel and waste management facilities including storage, electricity transmission infrastructure and associated development.
The project will create 25,000 construction jobs and 900 permanent jobs over its 60-year lifespan; generate enough electricity to power around six million homes; curb greenhouse gas emissions; and cut consumer bills over the long-term, significantly contributing to the UK economy.
Image: EDF Energy to build Hinkley Point C nuclear power station in Somerset, UK. Photo: courtesy of EDF Energy.