{
  "url": "https://openlegislation.uk/eu-decision-2015-658/annex-A/division-12",
  "json_url": "https://openlegislation.uk/eu-decision-2015-658/annex-A/division-12.json",
  "legislation": "eudn/2015/658",
  "legislation_title": "Commission Decision (EU) 2015/658 of 8 October 2014 on the aid measure SA.34947 (2013/C) (ex 2013/N) which the United Kingdom is planning to implement for support to the Hinkley Point C nuclear power station (notified under document C(2014) 7142) (Only the English version is authentic) (Text with EEA relevance)",
  "legislation_url": "https://openlegislation.uk/eu-decision-2015-658",
  "path": "annex/A/division/12",
  "kind": "division",
  "number": null,
  "heading": null,
  "text": "Table 14\nRegulated Settlement Benchmarks: Allowed returns on regulated assets for UK energy and water utilities in recent regulatory price controls\nhttp://www.ofwat.gov.uk/pricereview/pr14/gud_tec20140127riskreward.pdf\nhttps://www.ofgem.gov.uk/ofgem-publications/86375/fast-trackdecisionletter.pdf\nhttps://assets.digital.cabinet-office.gov.uk/media/535a5768ed915d0fdb000003/NIE_Final_determination.pdf. The Commission notes that while Table 13.10 of the quoted document provides a ‘low’ and a ‘high’ estimate for the reported financial indicators, the UK's submission seems to be based on the ‘high’ estimates alone.\nhttps://www.ofgem.gov.uk/publications-and-updates/riio-t1-final-proposals-national-grid-electricity-transmission-and-national-grid-gas-–-overview\nSource was not provided in the submission.\nhttp://www.caa.co.uk/docs/33/CAP%201140.pdf\nhttp://orr.gov.uk/data/assets/pdf_file/0011/452/pr13-final-determination.pdf\nNominal values are calculated using an arithmetic approach. A geometric approach would add 0,1 per cent-0,2 per cent to nominal cost of equity and nominal vanilla WACC estimates.\nCredit Suisse: National Grid — No longer a growth/value play, cut to Neutral, 29 May 2014; Credit Suisse: SSE — Referendum risk to be addressed, 15 August 2014; Macquarie: National Grid — Quality costs, but better opportunities elsewhere, 24 March 2014.\nThe submission interpreted the length of the investment horizon as the length of a price control period. However, the submission notes that the asset lives of the investments undertaken by regulated companies often span multiple price control periods, having ‘useful lives’ of up to 60 years.\nThe value ascribed by the regulator to the capital employed in the licensee's business.\nWhere source RAV values are stated in historical price terms, they have been converted to current prices using the ONS RPI index (unless otherwise stated).\nWe note that regulated companies' investment expenditure is in diverse, multiple projects that typically form only a small proportion of its RAV.\nhttp://ofwat.gov.uk/regulating/prs_web_rcvupdates\nhttp://www.westernpower.co.uk/docs/About-us/financial-information/2014/Annual-reports-and-financial-statements/Financial-performance-for-website-Mar-14.aspx\nhttp://www.uregni.gov.uk/uploads/publications/RP5_Main_Paper_22-10-12_FINAL.pdf (page 100).\nThis is Ofgem's forecast for RAV at the end of the price control period. Note that at the start of the price control period SHETL is estimated to have a RAV of 0,7bn (which is forecast to increase to 3,6 bn by 2020-21): https://www.ofgem.gov.uk/ofgem-publications/53747/sptshetlfpsupport.pdf (pages 36 and 37) and https://www.ofgem.gov.uk/ofgem-publications/53602/4riiot1fpfinancedec12.pdf (pages 8 and 9).\nhttp://www.bristolwater.co.uk/wp/wp-content/uploads/2013/04/Annual-Report-2013.pdf (page 27).\nhttp://www.heathrowairport.com/static/HeathrowAboutUs/Downloads/PDF/Development_of_Regulatory_Asset_Base_30-Jun-2014.pdf\nhttp://www.networkrail.co.uk/browse%20documents/regulatory%20documents/regulatory%20compliance%20and%20reporting/regulatory%20accounts/nril%20regulatory%20financial%20statements%20for%20the%20year%20ended%2031%20march%202013.pdf (page 331).\nSource: based on UK submission ‘SA.34974 Hinkley Point C State aid case — Answers to the Commission's questions received 16 September 2014’.\nRegulator\nOfwat\nOfgem\nCC\nOfgem\nCC\nCAA\nORR\nDetermination\nPR14 (not final)\nWPD 14\nNIE 2014 Final\nRIIO T1 2012 (NGET)\nBristol W 2010\nHAL 2014 Final\nNR 2013\nGearing\n62,50 per cent\n65 per cent\n45 per cent\n60 per cent\n60 per cent\n60 per cent\n62,50 per cent\nReal cost of debt (pre-tax)\n2,8 per cent\n2,6 per cent\n3,1 per cent\n2,9 per cent\n3,9 per cent\n3,2 per cent\n3,0 per cent\nReal cost of equity (post-tax)\n5,7 per cent\n6,4 per cent\n5,0 per cent\n7,0 per cent\n6,6 per cent\n6,8 per cent\n6,5 per cent\nReal vanilla WACC\n3,8 per cent\n3,9 per cent\n4,1 per cent\n4,6 per cent\n5,0 per cent\n4,7 per cent\n4,3 per cent\nInflation\n3,5 per cent\n3,5 per cent\n3,5 per cent\n3,5 per cent\n3,5 per cent\n3,5 per cent\n3,5 per cent\nNominal cost of debt (pre-tax)\n6,2 per cent\n6,1 per cent\n6,6 per cent\n6,4 per cent\n7,4 per cent\n6,7 per cent\n6,5 per cent\nNominal cost of equity (post- tax)\n9,2 per cent\n9,9 per cent\n8,5 per cent\n10,5 per cent\n10,1 per cent\n10,3 per cent\n10,0 per cent\nNominal vanilla WACC\n7,3 per cent\n7,4 per cent\n7,6 per cent\n8,1 per cent\n8,5 per cent\n8,2 per cent\n7,8 per cent\nAnalyst return on equity forecast (ex ante)\nc 14 per cent\nInvestment horizon — Price control length\n5\n8\n3\n8\n5\n5\n5\nInvestment Size: Regulatory Asset Value (RAV)\n70m — 11,7bn (estimated 2014 — 15) values)\n5,9bn (2014)\nc GBP 950m (forecast across price control)\n2,2bn — 14,8bn (forecast RAV range of companies over price control)\n0,39bn (2013)\n14,9bn\n45bn (2013)\nDegree of revenue protection\nMore than HPC — see answer to question 2c — NNBG Submission on Rate of Return, 10 September\nDegree of construction risk\nLess than HPC. See detailed discussion recitals 124 – 131 — NNBG Submission on Rate of Return, 10 September\nDegree of operating risk\nLess than HPC. See detailed discussion recitals 132 – 135 — NNBG Submission on Rate of Return, 10 September\nDegree of financing risk\nLess than HPC. See detailed discussion paragraphs 136 – 139 — NNBG Submission on Rate of Return, 10 September\nOther risks\nLess than HPC. See detailed discussion on difference in fundamental business models; diversification of assets; and technology risks in recitals 113 – 122 — NNBG Submission on Rate of Return, 10 September\nContingent equity required\nNone",
  "extent": "E+W+S+N.I.",
  "status": null,
  "version": "current",
  "annotations": [
    {
      "type": "footnote",
      "label": "f1",
      "text": "http://www.ofwat.gov.uk/pricereview/pr14/gud_tec20140127riskreward.pdf"
    },
    {
      "type": "footnote",
      "label": "f2",
      "text": "https://www.ofgem.gov.uk/ofgem-publications/86375/fast-trackdecisionletter.pdf"
    },
    {
      "type": "footnote",
      "label": "f3",
      "text": "https://assets.digital.cabinet-office.gov.uk/media/535a5768ed915d0fdb000003/NIE_Final_determination.pdf. The Commission notes that while Table 13.10 of the quoted document provides a ‘low’ and a ‘high’ estimate for the reported financial indicators, the UK's submission seems to be based on the ‘high’ estimates alone."
    },
    {
      "type": "footnote",
      "label": "f4",
      "text": "https://www.ofgem.gov.uk/publications-and-updates/riio-t1-final-proposals-national-grid-electricity-transmission-and-national-grid-gas-–-overview"
    },
    {
      "type": "footnote",
      "label": "f5",
      "text": "Source was not provided in the submission."
    },
    {
      "type": "footnote",
      "label": "f6",
      "text": "http://www.caa.co.uk/docs/33/CAP%201140.pdf"
    },
    {
      "type": "footnote",
      "label": "f7",
      "text": "http://orr.gov.uk/data/assets/pdf_file/0011/452/pr13-final-determination.pdf"
    },
    {
      "type": "footnote",
      "label": "f8",
      "text": "Nominal values are calculated using an arithmetic approach. A geometric approach would add 0,1 per cent-0,2 per cent to nominal cost of equity and nominal vanilla WACC estimates."
    },
    {
      "type": "footnote",
      "label": "f9",
      "text": "Credit Suisse: National Grid — No longer a growth/value play, cut to Neutral, 29 May 2014; Credit Suisse: SSE — Referendum risk to be addressed, 15 August 2014; Macquarie: National Grid — Quality costs, but better opportunities elsewhere, 24 March 2014."
    },
    {
      "type": "footnote",
      "label": "f10",
      "text": "The submission interpreted the length of the investment horizon as the length of a price control period. However, the submission notes that the asset lives of the investments undertaken by regulated companies often span multiple price control periods, having ‘useful lives’ of up to 60 years."
    },
    {
      "type": "footnote",
      "label": "f11",
      "text": "The value ascribed by the regulator to the capital employed in the licensee's business."
    },
    {
      "type": "footnote",
      "label": "f12",
      "text": "Where source RAV values are stated in historical price terms, they have been converted to current prices using the ONS RPI index (unless otherwise stated)."
    },
    {
      "type": "footnote",
      "label": "f13",
      "text": "We note that regulated companies' investment expenditure is in diverse, multiple projects that typically form only a small proportion of its RAV."
    },
    {
      "type": "footnote",
      "label": "f14",
      "text": "http://ofwat.gov.uk/regulating/prs_web_rcvupdates"
    },
    {
      "type": "footnote",
      "label": "f15",
      "text": "http://www.westernpower.co.uk/docs/About-us/financial-information/2014/Annual-reports-and-financial-statements/Financial-performance-for-website-Mar-14.aspx"
    },
    {
      "type": "footnote",
      "label": "f16",
      "text": "http://www.uregni.gov.uk/uploads/publications/RP5_Main_Paper_22-10-12_FINAL.pdf (page 100)."
    },
    {
      "type": "footnote",
      "label": "f17",
      "text": "This is Ofgem's forecast for RAV at the end of the price control period. Note that at the start of the price control period SHETL is estimated to have a RAV of 0,7bn (which is forecast to increase to 3,6 bn by 2020-21): https://www.ofgem.gov.uk/ofgem-publications/53747/sptshetlfpsupport.pdf (pages 36 and 37) and https://www.ofgem.gov.uk/ofgem-publications/53602/4riiot1fpfinancedec12.pdf (pages 8 and 9)."
    },
    {
      "type": "footnote",
      "label": "f18",
      "text": "http://www.bristolwater.co.uk/wp/wp-content/uploads/2013/04/Annual-Report-2013.pdf (page 27)."
    },
    {
      "type": "footnote",
      "label": "f19",
      "text": "http://www.heathrowairport.com/static/HeathrowAboutUs/Downloads/PDF/Development_of_Regulatory_Asset_Base_30-Jun-2014.pdf"
    },
    {
      "type": "footnote",
      "label": "f20",
      "text": "http://www.networkrail.co.uk/browse%20documents/regulatory%20documents/regulatory%20compliance%20and%20reporting/regulatory%20accounts/nril%20regulatory%20financial%20statements%20for%20the%20year%20ended%2031%20march%202013.pdf (page 331)."
    }
  ],
  "outstanding_effects": [],
  "provenance": {
    "source": "legislation.gov.uk",
    "source_url": "https://www.legislation.gov.uk/eudn/2015/658/annex/A/division/12",
    "retrieved_at": "2026-11-01T15:14:22.986865+00:00"
  },
  "licence": "Open Government Licence v3.0",
  "licence_url": "https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/",
  "attribution": "Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives."
}