The U.K.'s Office of Gas and Electricity Markets has proposed to cut funding for the transmission link that will connect Electricité de France SA's Hinkley Point C nuclear power plant to the grid.
The regulator, or Ofgem, has also decided not to proceed with the competition proxy model, or CPM, to fund the link, which will be built by National Grid Electricity Transmission PLC, saying that updated analysis shows the model is not in the best public interest.
Ofgem now plans to grant the National Grid PLC transmission subsidiary a total of £637 million, compared to the company's initial request of £717 million. It said the company could recoup the cost from consumers' energy bills over the next 45 years.
"Most of this investment will be covered by RIIO2, the next network price control which takes effect from March 2021 to 2026 for electricity transmission, and will deliver lower rates of return for investors, lower capital costs and significant savings for consumers," Ofgem added.
However, the decision to use the RIIO2 model is still not finalized. Ofgem will make the final decision once the six-week consultation period is completed.
In a response, National Grid said it will "will continue to work with Ofgem as part of the ongoing RIIO-T2 negotiation to reach an appropriate outcome that offers value to consumers as well as providing a fair balance of risk and reward."
However, the company will "continue to question the value of the CPM. We will also be looking to provide further evidence to Ofgem to support our view of the capital costs for this project."