Today Ofgem has launched its consultations on its ‘minded-to’ position on the funding as well as delivery model for our Hinkley-Seabank (HSB) project. These consultations will be open for six weeks.
The HSB project will connect EDF’s Hinkley Point C nuclear power station in Somerset to the grid, with a contractual connection date of December 2024.
Ofgem has proposed awarding £637m in capital costs in 2017/18 prices, which represents a 7% reduction once agreed deductions are taken into account – such as high impact, low probability risks. The reduction mainly relates to removal of some T-pylon funding, worth around £24m, and lower allowances for carrying out work to the local distribution network, project management and contingency.
Ofgem is also consulting on a change to the proposed regulatory delivery model – the funding mechanism for the project. While Ofgem put forward the Competition Proxy Model (CPM) in July 2018, in this consultation it’s proposed that we continue to use the existing Strategic Wider Works (SWW) mechanism. SWW allows Transmission Owners and Ofgem to consider the need for and funding of projects as and when they come up during the price control period.
Chris Bennett, Director, UK Regulation, said: “I’m pleased Ofgem has listened to our arguments against applying the CPM to the HSB project. We don’t believe the CPM delivers long-term value for consumers.
“The UK Regulation team will continue to work with colleagues and external stakeholders to provide further evidence to Ofgem to support our view on the capital costs. We will get final decisions later in the year on capital costs for delivering the project and the regulatory model.”
Ian Cartwright, Director, Capital Delivery, added: “I’d like to thank our teams who have already put in around a decade of hard work to get us to this point. This consultation and the subsequent outcome don’t affect our commitment to our customer, to deliver the connection safely, efficiently, on time and to the standards EDF would expect from us.
“We’re on site building a new substation, installing underground cable and preparing to construct the new T-pylons in 2020.”
These consultations follow several previous steps in the regulatory process, confirming the needs case for the connection and a decision on the delivery model for the project. Following the outcome of these consultations, we expect Ofgem to make a final decision before the end of the year.
You can find more information about the project on our website.