Revenue Collection Contracts
It is important that legislation allows for a stable flow of funding between consumers (through their suppliers) and a nuclear company which holds a generation licence which has had RAB licence conditions incorporated into it (a ‘RAB licence’). The Act allows the Secretary of State to give effect to a revenue channel necessary for the nuclear RAB model to function. This includes a power for the Secretary of State to designate a revenue collection counterparty and direct it to enter into a revenue collection contract with a nuclear company that has been designated by the Secretary of State for the purposes of the RAB model. The Act also allows for the Secretary of State to make regulations to implement the mechanics of the revenue stream, including placing obligations on electricity suppliers.
	For the purposes of the revenue stream, it is intended that the payments made to the nuclear company under a RAB model would be calculated by reference to a ‘forecast allowed revenue’ determined by the Authority at the start of a charging period, in accordance with the RAB licence. It would be within the power of the Authority to determine the allowed revenue forecast under the terms of the RAB licence. The Authority would calculate the Allowed Revenue throughout the lifetime of the project in accordance with the licence. The legislation allows the company to appeal to the Competition and Markets Authority (CMA) any decision made by the Authority which, in the opinion of the CMA, relates to the allowed revenue of the company, as long as the right to appeal is set out in the initial licence modifications made by the Secretary of State. Under existing legislation, the nuclear company would also have the right to bring an appeal against any decision of the Authority to modify its licence (see section 11C of the Electricity Act 1989). At the end of the charging period, the Authority would conduct any reconciliations to reflect any outstanding amounts due to the nuclear company for that period, in accordance with the RAB licence.
	During the construction phase, it is expected that the nuclear company would receive an amount equal to the full forecast allowed revenue, as it would not yet be generating and selling power. Where the nuclear power station is operational (including in the commissioning phase), for the purposes of forecasting revenue, the Authority would determine a market revenue, in accordance with the RAB licence conditions. It is intended that the Authority would then deduct this amount from the forecast allowed revenue that the nuclear company is entitled to receive over the course of the charging period. Reconciliation would take place to address any discrepancies between forecast and actual amounts.
	Following this, the Authority would inform the revenue collection counterparty how much it needs to collect over that charging period from electricity suppliers, in order for the nuclear company to receive its forecast allowed revenue. Once collected, the revenue collection counterparty would then pay the nuclear company. The combination of market revenues and the additional amount collected from suppliers would aim to ensure that the nuclear company received its forecast allowed revenue in each period.
	Where the market revenue is greater than the forecast allowed revenue, then payment equal to the difference, as determined by the Authority, would be made by the nuclear company to the revenue collection counterparty. This would ensure the company only receives the revenue necessary to meet its costs and expenditure incurred in the course of performing its activities in relation to the design, construction, commissioning and operation of the nuclear project.
	The cost to the revenue collection counterparty of its payment obligations to a nuclear generation company, as well as the operational costs of the revenue collection counterparty, will be met by licensed electricity suppliers in Great Britain (subject to any relevant exemptions), who may share this with electricity consumers. Suppliers will be charged by reference to their share of the Great Britain (GB) electricity market. Where the revenue collection counterparty receives payments back from nuclear companies under revenue collection contracts, these will be passed back to suppliers according to their market share.
	Aspects of the operation of the revenue collection counterparty will be subject to controls by the Secretary of State. This is designed to ensure the protection of suppliers and ultimately consumers.