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The nuclear Regulated Asset Base (RAB) model: how it works and rates for consumers
In December 2025, the Regulated Asset Base (RAB) nuclear model began impacting domestic and business electricity bills, adding 0.3p/kWh to unit rates to fund the construction of the Sizewell C nuclear power plant.
RAB levy costs associated with Sizewell C are likely to remain an additional component of electricity bills until around 2090, when the plant is expected to reach the end of its operational life.
This guide explains how the RAB nuclear financing model works and its impact on consumers. Here’s what we cover:
- What is the RAB model?
- Why the UK is using the RAB model for nuclear power
- How the RAB nuclear model works
- Who pays for nuclear projects under the RAB model?
- How the nuclear RAB model reduces risk for developers
What is the RAB model?
Although the Regulated Asset Base is new to the nuclear industry, it is the standard way of financing long-lived utility infrastructure in the UK, such as the electricity grids, gas distribution networks, and water reservoirs.
Under the RAB model, an independent economic regulator determines the fair amount an infrastructure developer earns each year, known as the “allowed revenue”.
The allowed revenue is calculated as a percentage return on development costs incurred, plus the reimbursement of operating costs. Once construction is complete, development costs incurred are gradually returned to the developer over the lifetime of the asset.
The payments made under the RAB model are ultimately recovered from the end users through regulated charges.
The aim of the RAB model is to de-risk the construction of large-scale infrastructure, lowering the cost of capital for developers and saving consumers money in the long term.
Why the UK is using the RAB model for nuclear power
To support the decarbonisation of the national grid, there are two major nuclear power plants currently under construction: Hinkley Point C, which began construction in 2017, and Sizewell C, which started construction in late 2025.
Government subsidies support both power plants, but the mechanisms used for each are different. To understand why the RAB model has been chosen for Sizewell C, it is necessary to understand the problems faced with Hinkley Point C.
CfD funding of Hinkley Point C
To support the construction of Hinkley Point C, the government has guaranteed the price of electricity EDF (the developer) will receive for the first 35 years of operation of the power plant under the contracts for difference (CfD) scheme.
The guaranteed price for electricity has been widely criticised for being significantly more expensive than the equivalent CfD prices for UK wind farms and solar projects.
Since the CfD price guarantee was awarded, the estimated construction costs of Hinkley Point C have more than doubled due to the complexity and evolving design of the European Pressurised Reactor (EPR) being used. Consequently, the project has become a financial burden for the developer.
Creating nuclear RAB funding for Sizewell C
The RAB model for nuclear power was created by the Nuclear Energy (Financing) Act 2022 specifically to encourage the construction of Sizewell C.
Unlike the CfD model, RAB financing is intended to protect EDF, from the significant cost overruns experienced at Hinkley Point C.
RAB financing is expected to significantly lower the developer’s cost of capital, which in turn is likely to lead to a lower overall cost to consumers than the CfD price that would otherwise have been necessary.
How the RAB nuclear model works
This section explains how the RAB nuclear model works throughout the entire lifecycle of a nuclear power plant.
1. Project designation
Under nuclear financing legislation, the government can designate specific developments to be funded by the RAB nuclear model if the project meets the following conditions:
- Value for money – The RAB model is expected to be cheaper for consumers over the plant’s lifetime compared with alternative funding mechanisms.
- Risk sharing – Construction and financing risks are shared between investors and consumers in a way that is reasonable and proportionate.
- Project readiness – The project is sufficiently developed (planning, design maturity, delivery capability) to justify entering a regulated regime.
Upon designation, a project is granted a generation licence from Ofgem, and a revenue collection contract is entered into with the Low Carbon Contracts Company (LCCC).
2. Construction starts and RAB payments begin
Under the RAB model, a nuclear power plant developer will earn money throughout the construction process, which typically takes around a decade to complete.
Ofgem is responsible for calculating how much the project’s owners will earn each year under the RAB model; this is known as the “allowed revenue”.
The allowed revenue is calculated in accordance with Ofgem’s Price Control Financial Model, which tracks the cumulative cost of building the power plant (the Regulated Asset Base).
During the construction phase, allowed revenue is calculated as:
Calculating the return on capital invested
Ofgem’s model includes an allowed return percentage, which the developer will earn on the capital expenditure it has incurred towards the Regulated Asset Base.
Pre-construction operating expenditure
Operating expenditure are costs incurred by the nuclear plant developer that are not explicitly related to the construction of the plant. Examples include:
- Staff and labour costs
- Project management costs
- Insurance and regulatory costs
Operational expenditure is not treated as part of the Regulated Asset Base, but is instead directly reimbursed as allowed revenue under the RAB model.
3. Regulated charges are collected
The allowed revenue paid to nuclear power plant developers is funded by policy costs paid by domestic and business energy suppliers. The RAB nuclear levy is charged for each kWh of power consumed by a suppliers customers.
The LCCC is responsible for collecting the policy costs from licensed energy suppliers.
The LCCC uses Ofgem forecasting to determine how much cash it needs to collect from licensed energy suppliers to meet upcoming RAB obligations. It calculates a payment per kWh that covers expected RAB payments, plus a reserve buffer to cover forecasting errors and missing payments when energy suppliers go bust.
The LCCC publishes the rates it will charge suppliers on its website and is then responsible for collecting these payments, alongside collecting levies for other schemes such as Contracts for Difference and the Green Gas Support Scheme.
Suppliers must ultimately pass these costs through to customers in the unit rate per kWh in the tariffs they offer.
4. Power plant starts generating electricity
Once construction is completed, a nuclear power plant will start generating electricity and feeding it into the national grid.
The operator of the plant will sell the power it produces on the wholesale electricity market to licensed electricity providers, which then supply it to domestic and business customers around the country.
A nuclear power plant typically sells its baseload power using a long-term power purchase agreement.
5. RAB payments during the operational phase
Once the nuclear power plant is operational, funding for the RAB model begins to be partially funded by the sale of electricity.
The completion of construction also starts a process where the developer is repaid for their investment in the Regulated Asset Base through an additional allowed revenue element called depreciation.
During the operational phase, RAB payments are calculated as:
Each of these elements is explained below:
Asset depreciation
Depreciation is a mechanism used to gradually reimburse the developer for their investment in the power plant over its entire lifetime.
Modern nuclear power plants such as Sizewell C are expected to be operational for 60 years, so each year following the completion of construction the developer will receive a repayment of one sixtieth of their investment in the Regulated Asset Base.
Ongoing return on assets invested
Once the plant is operational, the developer continues to receive a return on the capital invested in the Regulated Asset Base. However, the RAB is gradually reduced by depreciation payments, as follows:
Ongoing operating expenses
Once the nuclear power plant starts generating electricity, the operating expenses recovered through the RAB model will increase and begin to encompass:
- Purchases of uranium fuel
- Routine maintenance
- Ongoing safety and security costs
The ongoing operating expenses of the power plant will continue to be reimbursed as allowed revenue.
Market revenue
Once operational, payments under the RAB model are partially funded by electricity sales, known as “market revenue”.
If wholesale electricity prices increase, market revenue can exceed the allowed revenue. This means that, instead of receiving RAB payments, the developer will make payments to the LCCC.
In this scenario, the LCCC will collect RAB receipts from the developer, reducing overall environmental levies paid by consumers.
6. Decommissioning of the power plant
As the nuclear power plant reaches the end of its operational life, electricity generation stops, and the Regulated Asset Base is reduced to zero through depreciation.
As a result, the allowed revenue from operating the power plant falls to zero, and consumers stop paying a RAB levy associated with the nuclear power plant.
The decommissioning of the nuclear power plant is funded separately from the RAB through a legally binding Funded Decommissioning Programme (FDP), which the developer is required to build up while the plant is operating. This ring-fenced fund covers dismantling the plant, managing radioactive waste, and site remediation.
Who pays for nuclear projects under the RAB model?
The RAB model reimburses a nuclear power plant developer for all costs incurred in constructing a nuclear power plant.
These costs are passed to the Low Carbon Contracts Company (LCCC), which charges licensed energy suppliers in the retail electricity market. This section explains how these policy costs ultimately affect electricity prices.
RAB payments by licensed electricity suppliers
All electricity suppliers providing a grid supply to domestic and non-domestic customers are licensed by Ofgem.
One of Ofgem’s licence conditions is that these suppliers must contribute to the RAB levy for each kWh of electricity consumed by their customers.
As part of their operations, all suppliers submit the electricity meter readings of their customers to Elexon, the market operator.
Elexon provides the LCCC with the total electricity consumed each month by a supplier’s customer base. The LCCC uses this data to charge suppliers monthly for the RAB nuclear levy.
LCCC announcement of levy rates
The LCCC announces the nuclear levy rates in advance so that domestic and business electricity suppliers can incorporate these costs into their tariffs.
Following the commencement of construction at Sizewell C in late 2025, the following initial RAB levy rates have been announced:
| Period | 1–31 December 2025 | 1 January–31 March 2026 |
|---|---|---|
| RAB nuclear levy (p/kWh) | 0.34968 | 0.36658 |
Source: LCCC RAB bulletin. Includes the Interim Levy Rate, Total Reserve Amount and Operational Cost Levy.
The RAB levy rates will be updated each quarter to reflect the progress of the construction and the amount EDF has invested into the Regulated Asset Base.
Impact on consumer bills
Consumers ultimately pay the nuclear RAB costs through their electricity bills, in proportion to domestic and business energy consumption.
Impact on domestic electricity bills
The RAB nuclear levy is not typically shown separately on home electricity bills, but is instead incorporated into the unit rate per kWh of electricity consumed.
Ofgem incorporates the RAB rate into its calculation of the energy price cap, which limits out-of-contract charges to domestic customers.
Impact on business electricity bills
For most SMEs and micro business electricity customers, the RAB nuclear levy will not usually appear on bills; instead, it is incorporated into business electricity prices per kWh.
For large business energy customers on pass-through tariffs, the RAB nuclear levy may be shown separately on bills.
Eligible energy-intensive industries are exempt from paying environmental levies and therefore do not contribute to the RAB levy.
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How the nuclear RAB model reduces risk for developers
Constructing nuclear power stations is a risky proposition. New nuclear power stations such as Hinkley Point C and Sizewell C take 10 to 15 years to construct, costing up to £50 billion before they generate any electricity.
Since the future prices on the wholesale electricity market are unknown, building nuclear power stations requires government support to make the risks acceptable to developers.
The nuclear RAB model lowers the cost of capital for a developer by shielding them from two key risks:
- Construction risk – The developer earns a regulated return during construction, which significantly reduces the financial consequences of construction delays that are common on large-scale projects.
- Pricing risk – Domestic and business consumers of electricity bear the pricing risk, as RAB levy payments to the developer will increase if there is a fall in wholesale electricity prices.
Role of the economic regulator in the RAB model
Ofgem, the independent economic regulator for the energy industry, has a key role in setting the allowed revenues that developers receive for constructing power plants and in ensuring that the money is used efficiently. This section explains these two crucial roles.
Setting allowed revenues and returns
Under the RAB financing model, Ofgem determines the percentage return the developer receives on its investment in the Regulated Asset Base.
The percentage return is estimated by considering the typical financing costs and cost of equity that a large energy company would incur when building a nuclear power plant.
The return on investment is intended to be a fair reflection of market returns, while being no higher than necessary to protect consumers.
Ensuring cost efficiency
Under the nuclear RAB model, Ofgem allows developers to recover costs only if they are proven to be necessary and spent efficiently. It does this through detailed, frequent reviews of capex and opex expenditure by the developer.
Any inefficiency or avoidable expenditure incurred by the developer is not reimbursed through RAB payments, giving the developer a strong incentive to construct the plant in the most cost-efficient way.
Once the plant is operational, Ofgem applies incentives and penalties related to the availability, reliability, and efficient operation of the nuclear power plant.
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