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Ofgem is proposing to refuse National Grid Electricity Transmission (NGET) £80 million of its request for funding to connect the new reactor at Hinkley Point C.
NGET applied for £717 million initially to build the transmission link connecting the reactor to the grid but the energy regulator this morning (15 October) announced it was granting £637 million.
Ofgem said it had rejected £40 million in “risk funding” sought by NGET but added that it may be in a position to seek additional funding for some risks, such as extreme weather or widespread flooding, if they are “efficiently managed and take place during construction”.
The regulator also says it does not intend to allow new ‘T-Pylons’ used on the route as it is not satisfied that all these costs have been justified or that NGET has demonstrated that they represent value for money for consumers.
Furthermore, Ofgem is also proposing to disallow around £10 million of costs relating to project management and support, and to exclude around £3m of costs associated with works that will be undertaken by the local network operator.
To fund the investment, Ofgem is proposing to use the RIIO2 price control and will consult on this over a six-week period. It had initially planned to use the new ‘competition proxy’ funding model but updated analysis shows this model may no longer deliver the best savings for consumers.
The changes, Ofgem says, include a decrease in cost of equity allowed under RIIO 2, and an increase in the cost of equity and debt allowed under the competition proxy model.
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