Proposed bill in parliament could save energy consumers £30bn

The proposed Nuclear Energy (Financing) Bill will introduce a Regulated Asset Base (RAB) model as an option to fund future nuclear projects.

A RAB model is a method, typically used in the UK, to finance large scale infrastructure assets such as water, gas and electricity networks.

Under this model a company receives a licence from an economic regulator to charge a regulated price to consumers in exchange for providing the infrastructure in question.

The model enables investors to share some of the project’s construction and operating risks with consumers, significantly lowering the cost of capital which is the main driver of a nuclear project’s cost to consumers.

This charge is set by the independent regulator, who will ensure that any money spent is done in the interest of users. For a nuclear RAB, suppliers will be charged as the users of the electricity system toward the cost of the construction of the nuclear project, and the economic regulator will be Ofgem.

According to the government, the lower cost of financing the project is expected to lead to savings for consumers of at least £30bn on each project.

The RAB model will require consumers to pay a small amount on their bills during the construction of a nuclear project. According to the Department for Business, Energy, and Industrial Strategy, these payments will avoid the build-up of interest on loans that would ultimately lead to higher costs to consumers once the plant is in operation.

For example, a project starting construction in 2023 will at most add a few pounds to typical consumer bills during this Parliament and on average less than £1 per month during the full construction phase of the project.

The bill has had its first reading in the House of Commons with a second yet to be scheduled at the time of publication.

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