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  What is Regulatory Asset Base and how will it affect future energy charges for Scots?

THE UK Government is set on using a Regulatory Asset Base (RAB) model to fund
nuclear projects south of the Border. This will directly result in Scots
paying more on their energy bills. Here, former Scottish Office chief
statistician Jim Cuthbert explains what an RAB model is, and the problems
behind it. There are two main problems.

First, the construction phase of
nuclear projects is extremely long. Further, nuclear construction is
notoriously beset by technical difficulties. Midway through a nuclear
construction project, it will be extremely difficult for the regulator to
resist pressure for the RAB base to be inflated to overcome any technical
problems or uncertainties.

Secondly, the operating life of nuclear projects
is again very long, with the UK Government’s current working assumption
being about 60 years. This means that any surplus which is built into the
stream of future RAB payments will be available to be capitalised over this
long period – which will greatly increase the potential windfall profits
to be extracted by the original equity investors.

 The National 23rd Oct 2022


October 23, 2022 - Posted by | business and costs, politics, UK

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