National Grid will be able to recover £106 million revenue from Ofgem during the post-construction period, but the overspend will not be shared with consumers via transmission charges, meaning Grid will have to pay.
The firm’s final calculation of the costs it incurred on the project is £122.16 million, against £120.75 million it was expected to spend.
Ofgem said it had reviewed the costs and does not consider that the “relatively small overspend” reflects a significant change in the value of the work delivered. This, it said, is because the boundary transfer capability of 2.8GW, which the project was designed to deliver, was delivered on time.
“Therefore, our initial view is that the slight divergence from the forecasted cost should not impact on the opening asset value, which should remain at £105.98 million as stated in the licence,” the regulator added.
The regulator is currently consulting on its decision and is seeking responses by 17 November.
The England-Scotland interconnector scheme was funded under the conditions of the transmission investment for renewable generation (TIRG) mechanism, which requires Ofgem to decide the post-construction opening asset value that will determine the revenue that National Grid receives for the five years following construction of the project.
During the five-year post-construction period, the transmission operators’ project revenues are recovered from consumers based on the original forecast of costs in the licence, allowing them to keep any cost savings if they deliver the project for below forecasted cost during the period.
Where the transmission operator overspends on a project, this exposure is not shared with consumers.
The England-Scotland interconnector project is an electricity transmission investment to increase the boundary capacity across the England-Scotland border of 2.8GW. The project was jointly delivered by National Grid Electricity Transmission and SP Transmission, as work was required on both their respective networks.