UK energy regulator Ofgem has cut £80mln in funding from National Grid PLC’s (LON:NG.) works to connect new Hinkley Point C nuclear reactor to the grid.
The regulator said that consumers will save money under its new plan to offer National Grid Electricity Transmission (NGET) a reduced £637mln funding grant, down from its initial request of £717mln.
Ofgem reduced the funding after rejecting NGET’s proposed £40mln in "risk funding" and said that the grid would be able to seek additional grants to cope with risks such as extreme weather or widespread flooding that might take place during construction.
The energy market supervisor said it was not satisfied that NGET had “sufficiently justified” the additional costs related to 'T-Pylons' used on the route.
National Grid said it will review Ofgem’s consultations in detail as part of an “ongoing negotiation to reach an appropriate outcome that offers value to consumers as well as providing a fair balance of risk and reward”.
The grid added that it hopes to provide further evidence to Ofgem to support its view of the capital costs for the Hinckley point transmission link.
Ofgem said that it intends to fund the investment using RIIO2, the next network price control which takes effect from March 2021 to 2026, and this designed to produce lower rates of return for investors, lower capital costs and significant savings for consumers all the while leading the decarbonisation shift.
Shares in National Grid were at a year-high in early trading on Tuesday.