Source · Select Committees · Welsh Affairs Committee
Recommendation 9
9
Accepted
Paragraph: 48
Explain mechanisms for monitoring and reporting consumer risk during Sizewell C construction.
Recommendation
We recognise the high cost of construction of nuclear energy plants and the large upfront investment needed to get a project to final investment decision. We hope that the Regulated Asset Base (RAB) model will help overcome these investment challenges. However, there are valid concerns about the risk to consumers, which needs to be closely monitored in order to be better understood as the RAB model is used for the first time for a nuclear project at Sizewell C. The Government should explain the mechanisms it will use to monitor and report to the House during the construction of Sizewell C.
Government Response Summary
The government states that existing legislation (Nuclear Energy (Financing) Act 2022) and current processes, including HMT Green Book approvals and Major Project Review Group approvals, ensure consumer interests are considered and projects are monitored. Ofgem, as the economic regulator, will have full oversight and audit rights during construction.
Paragraph Reference:
48
Government Response
Accepted
HM Government
Accepted
As a tried and tested funding model for large-scale infrastructure projects, the Government believes that using RAB could encourage private sector investment and cut the cost of projects by reducing the cost of project finance, the biggest driver of new nuclear project costs. We recognise the importance of ensuring that – in contributing towards the costs of projects using the RAB model –consumers are protected from unacceptable levels of risk, and the interests of consumers are central to the Nuclear Energy (Financing) Act 2022, which establishes use of the RAB model on nuclear projects. The Act requires the Secretary of State to consider the interests of existing and future consumers of electricity, including their interests in relation to the cost and security of supply of electricity. A nuclear project would be subject to detailed value for money assessments before being approved for a RAB or awarded a Government Support Package. As the RAB could support multiple nuclear projects in the future, the Government will continue to monitor its impacts on consumer bills alongside other energy schemes. The Sizewell C Project is part of the Government’s Major Projects Portfolio and is subject to HMT Green Book approvals and assurance, as well as Major Project Review Group approvals in advance of key decision points. During construction a project will be incentivised to deliver to time and schedule, through an incentives regime managed by the economic regulator, Ofgem. Ofgem’s principal objective is to protect the interests of all existing and future consumers, and during construction Ofgem will have full oversight and audit rights to the project’s activities.