Energy price cap methodology: Nuclear Regulated Asset Base (RAB)

What changed

Ofgem has decided to fold a Nuclear RAB cost allowance into the default tariff cap from 1 January 2026. The decision, published 21 November 2025 following a consultation that ran from 27 August to 27 September 2025, sets the methodology for how suppliers recover the costs of funding the Nuclear RAB scheme from price-capped customers. The scheme itself was created by the Nuclear Energy (Financing) Act 2022 and is funding the construction of Sizewell C.

The mechanism is a new component within the policy cost allowance, the part of the cap that already passes through Renewables Obligation, FiT, Capacity Market and similar levies. Ofgem's stated objective is that "default customers pay no more than the efficient costs incurred by suppliers in funding the Nuclear RAB scheme," which means the cap recovers the levy suppliers are obliged to pay, not a margin on top of it. The calculation detail sits in Annex 4, the policy cost allowance methodology spreadsheet (v1.22).

What this means in practice

This is the first time a nuclear construction project enters household bills before it generates a unit of electricity. The Regulated Asset Base model is designed precisely to do this: it lets the project developer earn a return on capital during construction, funded by a levy on electricity suppliers, who recover it through customer bills. The price cap decision is the plumbing that connects the levy to the roughly 22 million households on default tariffs.

The seen cost is the financing certainty the RAB gives Sizewell C: a regulated return that lowers the cost of capital relative to the Hinkley Point C CfD, which is the explicit policy justification for the model. The unseen cost is what this decision operationalises. Consumers begin paying in 2026 for an asset whose first power is not expected until the mid-2030s. That is roughly a decade of pre-payment on a plant that delivers nothing in return during the payment period, and the construction-risk exposure sits with the bill-payer rather than the developer's equity. The RAB transfers cost-overrun and delay risk from investors to a captive, price-inelastic customer base. Hinkley Point C, built under a CfD where the developer carried construction risk, is years late and billions over budget; under RAB, that same overrun profile would land on consumers through cap adjustments rather than on shareholders.

The financial scale at the January 2026 cap is small per household, because Sizewell C is early in construction and the levy ramps with capital deployed. The number is not the point. The structural commitment is. By integrating the allowance into the standing methodology rather than treating it as a one-off, Ofgem has built the channel through which the levy scales over the entire construction period and beyond into the operational repayment phase. As Sizewell C's capital draw increases, the allowance increases automatically within the existing cap architecture; no fresh primary decision is required to raise it.

It also sets the template. Any subsequent RAB-funded reactor, the most likely candidates being further large-scale projects or an SMR programme should one reach a financing decision, would flow through this same allowance mechanism. The precedent Ofgem has set is not "Sizewell C costs go on bills" but "nuclear construction RAB costs are a standing component of the price cap." That is a more durable and more consequential decision than the headline figure suggests.

One technical point worth flagging: the allowance is a pass-through of efficient supplier costs, so it is not a place where Ofgem exercises ongoing scrutiny of whether Sizewell C is well-run or on budget. That oversight sits with the economic regulation framework under the Nuclear Energy (Financing) Act and the project's regulated revenue determination, not with the price cap. The cap simply recovers whatever the scheme charges. Bill-payers are exposed to the project's cost performance without a cap-level mechanism to discipline it.

What happens next

The allowance is live in the cap from 1 January 2026, so it appears in the cap period covering January to March 2026 and every period thereafter. Ofgem updates the policy cost allowance each cap cycle, which means the Nuclear RAB component will be revised within the standard quarterly cap process as the levy amount changes; there is no separate annual consultation gating future increases.

Watch three things. First, the levy trajectory: the per-household figure will rise through the construction period, and the steepness depends on Sizewell C's capital deployment schedule and any cost revisions to its regulated revenue. Second, scope expansion: if government takes a financing decision on a further RAB nuclear project, expect this allowance to be the vehicle, with the methodology amended rather than rebuilt. Third, the accessibility gap Ofgem itself flagged, Annex 4 is not fully accessible, so the granular calculation logic is harder to scrutinise than it should be for a charge that is now a permanent fixture of every default bill.

The decision documents and non-confidential consultation responses are published on the Ofgem energy price cap page. The operative reference for the calculation is Annex 4, policy cost allowance methodology v1.22.