Energy regulator Ofgem has confirmed
its decision to cut the proposed cost of the
Hinkley-Seabank project by £60m, saving consumers money on their
bills.
The link, which is due to be completed in 2024, will
connect the new Hinkley Point C nuclear power station to the
grid.
In October Ofgem
set out the areas it deemed National Grid Electricity
Transmission (NGET) costs to be too high.
NGET wanted to spend £716m on the new link, but Ofgem’s
decision today cuts that to £656m. Ofgem has determined this to
be the efficient cost for delivering the project following
consultation and analysis. The cost will be spread over the next
45 years.
Ofgem’s minded-to position in October proposed to cut costs
to the project by £80m. However, following consultation and
analysis of new evidence, Ofgem is satisfied that some of these
costs are appropriate and provide value for money. These
include:
· £11.3
million of development costs in relation to the project’s
T-pylons
· £5.8
million of additional costs in relation to project contingency,
and
· £1.6
million of additional costs in relation to project management.
(1)
NGET’s rate of return for delivery of the project will be
set in line with Ofgem’s tough next round of price controls,
RIIO-2, which are expected to be finalised later this
year.
Ofgem has confirmed and published its
decision to fund the project through the
RIIO price control arrangements rather than through the
Competition Proxy Model. Ofgem’s analysis shows that this
presents best value to bill payers.
When compared to RIIO-1, the updated RIIO-2 framework is
projected to save billions of pounds for consumers over its five
year period.
Notes to editors
1) NGET
originally requested a total of £51.8m for project management
costs. This should have been £50.7m. This has been
corrected and explained in the decision document.
2) Most
of this investment in this project be covered by RIIO2, the next
network price control that takes effect from March 2021 to 2026
for electricity transmission, and will deliver lower rates of
return of investors, lower capital costs and significant savings
for consumers.
3) Ofgem
proposes to cut costs of new Hinkley Point grid
link: https://www.ofgem.gov.uk/publications-and-updates/ofgem-proposes-cut-costs-new-hinkley-point-grid-link
