Regulated Asset Base (RAB) costs explained
Welcome to our Third Party Costs explained video series. Before enjoying this content we recommend you refer to our disclaimer and associated material.
Disclaimer
The information in this video and article was accurate as of 1 October 2025. We update our TPCs Explained Hub every Spring to reflect any changes.
What is the Regulated Asset Base (RAB)?
The GB electricity sector is implementing a Regulated Asset Base (or RAB) model to fund and support new nuclear power stations and encourage private sector investment.
The model’s used in other utility and transport sectors to finance large scale infrastructure projects. Unlike other models, it provides support throughout the build and operational phases of an asset’s lifetime, rather than only through the operational phase.
The first project gaining support under the scheme is Sizewell C, off the coast of Suffolk in the East of England. However, the RAB model is likely to support other new nuclear assets, as most of the country’s older reactors are expected to come to the end of their operational lives in the coming decade.
How does RAB work?
The RAB charge works by allowing the developer of a major infrastructure project to start recovering costs from consumers while the project is still being built, rather than waiting until it’s operational.
The Government will first approve a major infrastructure project. This is then designated under the RAB model, providing the developer with a predictable revenue stream, reducing the financial risk of the project. Ofgem will determine how much the developer is allowed to recover based on:
- Efficient construction costs
- A fair return on investment
- Performance against milestones
Ofgem will communicate a RAB levy to the Low Carbon Contracts Company (LCCC), who will levy suppliers. In turn, suppliers then collect the RAB charge from consumers, meaning consumers help fund the project over time.
What will RAB cost?
The RAB levy charge is expected to make up around 2% of the bill in 2025.
Instead of commencing the revenue recovery on 1 November, as initially announced by the LCCC, the Interim Levy Rate (ILR) will start from 1 December. The levy itself has also shifted from £3.45/MWh to £3.54/MWh; this will apply for the calendar month of December 2025 before a new levy is set for Q1 2026.
The current rates reflect forecast costs to be recovered for the construction phase of Sizewell C, which is likely to take place over the next 10 years. The RAB levy could rise significantly depending on what costs are actually incurred to complete the construction.
How will RAB be recovered?
Ofgem will let its revenue counterparty, the LCCC, know how much it needs to get from suppliers and, ultimately, end consumers.
The amount will comprise an interim rate, reserve and reconciliation payments, and an operational costs levy. As such, it will be similar to the Contracts for Difference (or CfD) scheme.
Suppliers will have 1 to 3 months’ notice of the charge.
What drives the RAB charge?
The main RAB price driver is the allowed revenues and any adjustments under the scheme. As well as this, the phasing of revenues could alter the cost, as could substantial changes in power demand over which the costs are recovered.
To learn more about the other TPCs in your energy bill, head to our TPCs explained hub using the button below. Or, to understand more about electricity prices, download our latest bi-annual Electricity Prices Explained guide.
Go to the TPCs explained hubLegal disclosure
Cautionary Statement
This content may contain certain statements, statistics, projections, expectations (including expectations related to targets, goals or objectives such as emissions targets) and other information that are, or may be, “forward-looking statements”. Forward-looking statements often do not solely relate to historical or current facts, and may contain words such as ‘aims’, ‘believes’, ‘expects’, ‘intends’, ‘likely’, ‘plans’, ‘seeks’, and words of similar meaning.
By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Therefore, the accuracy and completeness of all such statements are not warranted or guaranteed. Although Drax believes that the statements, expectations, statistics, targets, projections and other information reflected in such statements are reasonable, they reflect Drax’s current view and no assurance can be given that they will prove to be correct or achievable. Information contained in this content, including commitments, goals, targets and objectives, and their related frameworks, methodologies or approaches, are subject to change without notice.
Actual results and outcomes may differ materially from those expressed, implied or projected by the forward-looking statements in this document. There are a number of factors, many of which are beyond the control of Drax, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements.
Disclaimer
Whilst every effort is made to ensure the accuracy of any information or material contained in or associated with this content, none of Drax Energy Solutions Limited, their affiliates and employees, either individually or collectively accept any responsibility for any loss, damage, cost or expense of whatever kind arising directly or indirectly from or in connection with the use by any person whomsoever of any such information or material; neither do they make any express or implied representation or warranty as to the accuracy or completeness of the data, information or statements contained herein and such data, information or statements are not to be relied-upon by any party accessing such data, information or statements.