* Ofgem to save money for consumers
* Ofgem rejects "risk funding" for Hinkley–Seabank project
* Project could be funded via normal price-control process
(Adds details, analyst comment)
By Noor Zainab Hussain
Oct 15 (Reuters) - British energy market regulator said it
would grant National Grid 637 million pounds ($803.38
million) to build the transmission link for the Hinkley Point C
nuclear plant, lower than the company's initial request for 717
million pounds.
Ofgem said on Tuesday consumers will save money under its
plans to reduce National Grid Electricity Transmission's (NGET)
funding request to connect the new Hinkley Point C nuclear
reactor to the grid. https://bit.ly/2piprDs
The regulator's move comes after EDF said last
month that its Hinkley Point C nuclear plant could cost up to
2.9 billion pounds more than its last estimate, and face further
delays.
Britain needs to invest in new capacity to replace its aging
coal and nuclear plants due to close in the 2020s. Once
complete, Hinkley C is expected to provide around 7% of the
country's electricity.
EDF said Hinkley Point C was estimated to cost 21.5-22.5
billion pounds. EDF initially promised Hinkley C would be
powering ovens to cook Britons' Christmas dinners in 2017 and
was originally forecast to cost 18 billion pounds.
The 3.2 gigawatt plant, which EDF is building with China
General Nuclear Power Corp, is now expected to begin generation
at the end of 2025.
Ofgem said it cut the allowed funding after rejecting 40
million pounds in "risk funding" that NGET had sought to be
included in the upfront cost of the link.
NGET 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,
Ofgem added.
Ofgem said it had planned to use the new "Competition Proxy"
funding model to fund the link, but updated analysis showed that
this may no longer deliver the best savings for consumers.
Ofgem plans to use its network price control framework to
allow NGET to fund the investment and recoup the cost from
consumers' energy bills over 45 years.
The regulator now plans to use the next network price
control which takes effect from March 2021-2026 known as RIIO2.
Bernstein analysts called Ofgem's move "positive".
National Grid, which was granted permission to work on the
station in 2018, said it would look to provide further evidence
to Ofgem to support its view of the capital costs for the
Hinkley-Seabank project, meant to allow for the safe connection
of the nuclear power station.
"While we welcome Ofgem's minded-to position not to proceed
with the Competition Proxy Model (CPM) for this project, we
continue to question the value of the CPM," National Grid said
in a separate statement.
At the time, the Hinkley-Seabank project was forecast to
cost 650 million pounds.
Ofgem said it would make a final decision on the allowed
cost and whether to use the RIIO2 price control model following
a six-week consultation period.
($1 = 0.7929 pounds)
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by
Shounak Dasgupta, Rashmi Aich and David Evans)
National Grid (NG.)