Ofgem challenges National Grid's Hinkley Point costs

Ofgem said on Wednesday that it is challenging National Grid's £840m proposed costs to upgrade the high-voltage grid needed to connect to the new Hinkley Point C nuclear power station.

The energy regulator reckoned the costs to consumers can be reduced by around 20%, particularly in relation to the treatment of how severe weather could delay construction of the grid upgrades.

Ofgem also highlighted the benefits of competition in delivering further potential savings for consumers.

"The options are for National Grid to put the financing, construction and operation of the infrastructure upgrade out to competitive tender for a third-party to deliver on National Grid’s behalf. Alternatively Ofgem could estimate National Grid’s revenue for building and operating the infrastructure based on if the upgrade had been tendered on a fully competitive basis."

The regulator has launched a consultation on these options and on the proposed costs for the upgrade and will make a final decision on whether the upgrade is needed and how it should be delivered by the end of the year. A decision on what costs will be allowed for the upgrade would be made in late 2018 or early 2019.