Consultation outcome - Revenue stream for the nuclear-regulated asset base (RAB) model

Consultation outcome - Revenue stream for the nuclear-regulated asset base (RAB) model

From: Department for Business, Energy & Industrial Strategy

Revenue stream for the nuclear RAB model: government response

PDF, 297 KB, 25 pages

Annex 2: Ofgem response

PDF, 91.6 KB, 2 pages

Detail of outcome

The government has reviewed the consultation responses and considers it appropriate to proceed with the proposals set out in this consultation. The draft revenue regulations laid before Parliament on 14 December 2022 reflect the positions set out in the consultation and are subject to the affirmative procedure.

This consultation set out the operational costs levy for the first 3 financial years (2022-2023 to 2024-2025). Prior to any amendments to the revenue regulations to reflect the operational costs levies for the next 3 financial years (2025-2026 to 2027-2028), BEIS would conduct a consultation on those future RAB operational costs levies before laying amendments to the regulations (and so on for subsequent likely 3-year cycles).

If we consider further changes need to be made to these regulations, any amendments would also be subject to the affirmative procedure.

Detail of feedback received

We received 40 responses to this consultation from organisations and members of the public, including:

• electricity / energy suppliers
• The Authority (Ofgem)
• the national system operator (National Grid ESO)
• nuclear developers
• other nuclear sector organisations
• trade bodies (representing energy intensive industries)
• trade bodies (nuclear/energy focused)
• environmental groups / NGOs
• members of the public

Most respondents were supportive of the proposals, and content with the similarities to the Contracts for Difference (CFD) revenue regime and the proposed difference RAB specific revenue mechanics. Where concerns were raised, they were considered within the scope of the consultation question posed and have been reflected in this response document along with the government’s position.

We're seeking views on the revenue regulations for the implementation of the nuclear RAB model revenue stream.

This consultation ran from
9am on 14 June 2022 to 11:45pm on 9 August 2022

Consultation description

The Nuclear Energy (Financing) Act 2022 (‘the Act’) makes provision for the implementation of a regulated asset base (RAB) model for nuclear energy generation projects. Fundamental to the successful implementation of a nuclear RAB model is a robust revenue stream that ensures a secure and consistent flow of revenues between electricity suppliers and nuclear companies benefiting from the RAB model for the duration of their nuclear project’s regulatory period.

The Act gives the Secretary of State powers to make ‘revenue regulations’ in order to set out the detailed mechanics of how the revenue stream would operate under the RAB model. The Act also places a statutory obligation on the Secretary of State to consult with the persons specified in section 25 of the Act before making revenue regulations. As the consultation will inform drafting of revenue regulations that could support multiple nuclear projects benefiting from the RAB model, responses are also welcomed from any persons with an interest in this policy area.

The consultation document sets out government’s proposals regarding how the revenue mechanics would work under the nuclear RAB model. It is proposed that revenue regulations would largely replicate the provisions of the contracts for difference (CfD) revenue regime primarily set out in The Contracts for Difference (Electricity Supplier Obligations) Regulations 2014 (as amended). As a result, one of the primary focuses of the consultation and accompanying questions is on how it is proposed that the revenue regulations would differ from the CfD revenue regime to account for nuclear RAB specific design mechanics. These matters relate to:

• information sharing mechanics required for the determination of supplier payment obligations under the regulations
• wider information sharing provisions required for the effective functioning of the revenue stream
• the notice period for forthcoming quarterly supplier interim levy rates and reserve amounts
• Secretary of State directions to offer to contract under section 18 of the Act, including considerations relating to the bespoke nature of revenue collection contracts and certain matters the terms of the revenue collection contract must cover
• the revenue collection counterparty notifying the Secretary of State if it considers it is unable to carry out its functions
• the revenue collection counterparty projecting future supplier payment obligations
• potential exemptions to supplier payment obligations
• potential measures relating to vulnerable groups and consumers in receipt of universal credit
• the revenue collection counterparty’s operational costs

The purpose of this consultation is to seek views on the proposals set out in the document to inform the policy behind the revenue regulations. It is expected that the consultation will be of particular interest to the statutory consultees named in section 25 of the Act as well as nuclear developers and other stakeholders who would be directly affected by the proposals for the revenue regulations.

We have also published a consultation stage impact assessment.

Read the BEIS consultation privacy notice.

Revenue stream for the nuclear RAB model

PDF, 417 KB, 39 pages

Consultation stage impact assessment

PDF, 365 KB, 13 pages