A new non-commodity cost is set to hit business energy bills in autumn, to help fund nuclear infrastructure. Here’s our short guide to the Nuclear RAB Levy.
What is the Nuclear RAB Scheme?
The Regulated Asset Base (RAB) model has long been used in the UK to fund large-scale infrastructure such as water networks, energy grids and transport projects. It works by allowing project developers to receive regulated payments during construction, reducing financing risk and the overall cost of capital.
The Nuclear Energy (Financing) Act 2022 made it possible to apply the model to nuclear projects. Sizewell C will be the first to proceed under this framework. The scheme is regulated by Ofgem and administered by the Low Carbon Contracts Company (LCCC), which will forecast costs and manage payments.
How will the levy work?
All suppliers are expected to pay the levy, contribute based on their market share, and most will pass the cost on to customers as a separate item on bills.
Customers with a valid Energy Intensive Industries (EII) exemption certificate will not be charged.
The levy will comprise:
- Interim Levy Rate (ILR): The main charge, covering payments to Sizewell C.
- Operational Costs Levy Rate: A smaller £/MWh charge for running the scheme, set at £0.0028/MWh for April 2025-March 2026.
- Reserve Payments: Contributions to a Total Reserve Amount (TRA) to protect the scheme if any suppliers default.
Forecasting and reconciliations
Each charging year, the LCCC will forecast the ILR and TRA. The quarterly ILR will be published 30 days before the quarter starts and can be adjusted if funds are expected to fall short.
Suppliers will bill customers based on these forecasts, then issue reconciliation invoices when actual costs are confirmed. If defaults by suppliers cause a shortfall above Ofgem’s set threshold, mutualisation will be triggered – other suppliers will cover the gap, with additional charges passed to customers.
What will it cost?
Exact costs are not yet confirmed. Initial estimates suggest the levy could start around 0.05p/kWh, based on current supplier forecasts ranging from 0.0403p/kWh to 0.05p/kWh.
Next steps
Suppliers are currently finalising when they will start billing the levy and how it will appear on invoices. More clarity is expected closer to the autumn 2025 introduction date.
For now, businesses and consumers should be aware that the Nuclear RAB Levy will be an additional non-commodity charge on electricity bills. It will support the UK’s long-term nuclear power programme while increasing short-term costs.
For advice on how the Nuclear RAB Levy will affect your energy costs, and how to reduce your non-commodity costs, get in touch with the procurement experts at Sustainable Energy First.
