Hinkley Point C will cost customers at least £4.4bn

The UK’s first new nuclear power station for a generation will cost electricity customers at least £4.4bn and the subsidy bill could reach £20bn, the government has revealed.

The charges, which will be passed on to nearly 30 million customers, are a result of ministers’ decision to guarantee the new Hinkley Point C operators £92.50 for every unit of electricity – more than double the current market price.

It comes less than a week after the government admitted the £24bn plant in Somerset will be subsidised – something it denied throughout the last parliament.

Details of the costs – an average of about £150 to £660 per customer over the 35 years of the deal – are exposed in a document quietly put before parliament last week and which has only just come to light.

It also reveals that taxpayers would have to pay up to £22bn compensation to the owners, French energy giant EDF and the Chinese government, if the UK government or the European Union do something that forces the plant to close early.

The opening of Hinkley Point C has been delayed twice, from 2017 to 2025, but the operators will now be penalised if it is later than that, and government can cancel the deal if it is not operating by 2033.

Tom Burke, chairman of environmental thinktank E3G, also said the government estimate of the price guarantee – £4.4bn-£19.9bn in today’s prices – underplayed the sums involved. His organisation estimates that with annual inflation the actual sum handed over during 35 years will be £45bn.

“I’m not surprised they want to hide what a bad deal it is and sneak it past parliament,” said Burke. MPs now have little more than a week to stop the agreement being signed off by the Treasury. The Green MP Caroline Lucas on Wednesday made a formal objection in Parliament.

The document also reveals:

• Further guarantees for nuclear waste disposal and insurance under which the government will help pay costs if they rise above a certain level.
  

• Both sides can renegotiate the deal 15 years and 25 years after reactor 1 starts working – with no need for parliament to agree new terms.

• The plant’s owners can make a profit of more than 11% before they share the gains with customers – more than double the level for subsidised renewable operators.
  

• Some good news for consumers: if the cost of building the two reactors is below estimates, or if interest on the debt is reduced in future, at least half the saving must be returned to them.
  

The Department for Energy and Climate Change defended the deal, arguing the minimum £4bn extra cost for billpayers was comparable with existing subsidy charges for renewable energy projects at a similar scale.

A spokesperson said: “Hinkley will provide clean, affordable and secure energy. It will power 6m homes for nearly 60 years and consumers won’t pay a penny until it is up and running. This is a good deal for everyone and a major step forward for the UK economy – bringing billions of pounds of investment to the UK and creating more than 25,000 jobs.”

The apparently high profit margins follow modelling for DECC that suggest the Hinkley project would be rated “at the top end of junk”, partly because of concerns over the untested EPR reactors being used, and loss of expertise in the UK industry.

Last week, it was announced that the Chinese government will take a one-third share in Hinkley and work with EDF on two further nuclear plant proposals at Sizewell in Suffolk and Bradwell in Essex. The guaranteed market price will drop to £89.50 per megawatt hour if the plant at Sizewell goes ahead rapidly.

EDF, backed by the French government, has already spent £2bn on the site and expects to ramp up building work in November.

HSBC has urged George Osborne, the chancellor, to “delay or abandon” the scheme, and the world’s two biggest credit rating agencies – Moody’s and Standard & Poor’s – have warned they could downgrade EDF’s credit rating because of the “risky” project – making it more expensive for the company to borrow money.