c.2013 New York Times News Service

c.2013 New York Times News Service

LONDON — European regulators said Monday that they expected to conduct a full inquiry into a deal to build Britain’s first nuclear power station since 1995, threatening delays that could undermine investment plans for the 16-billion-pound project.

The concern in Brussels is that the terms of the contract might involve British government subsidies that violate European competition rules. The issue would be whether the rates the government has guaranteed to the power plant’s operators for 35 years would distort the market for electricity in the European Union.

“We are starting to analyze what is in the British proposal,” the European competition commissioner, Joaquín Almunia, said at a Brussels conference on Monday. “Probably we will open a formal investigation,” he said. The comments, which were reported by Reuters, were confirmed by Almunia’s office.

Almunia said he had received formal notification from Britain two or three weeks ago about the agreement reached in October with EDF, the French state-controlled utility, to build the plant at Hinkley Point in southwest England.

The European Commission, which is the antitrust regulator for the 28-nation European Union, is empowered to ensure that the bloc’s single market is not distorted by state subsidies.

But the deal is controversial within Britain, as well, not only because it gives the French company EDF guarantees of profit from the electricity generated — whose rates will be paid mainly by Britons — but also because the deal would open the door to financing from China. EDF is working out an agreement with two large Chinese state nuclear companies to take 30 to 40 percent of the project.

Because no other deal of this type has been put before European regulators, the outcome is unpredictable. The commission has always been sensitive to the different positions member governments have taken toward nuclear policy, leaving the energy mix in each country up to national capitals. Moreover, with both Britain and France having a stake in the success of the Hinkley Point project, worth about $26 billion, any decision to block the project would involve taking on two of the biggest EU nations.

Under European rules, the commission has two months from formal notification of a deal where there is a potential issue over state aid to decide whether to approve the deal or mount a full-scale investigation. A full inquiry has no time limit, so its length depends on the complexity of the case.

“This is a rather complex issue; I expect a lengthy process,” said Claude Turmes, a Green Party European legislator from Luxembourg. “I see that the commission will have to change at least certain terms of the contract,” said Turmes, who follows the issue closely as a member of the Industry and Energy Committee in the parliament.

Almunia’s spokesman, Antoine Colombani, described the case as “new and complex” and said it was premature to prejudge the outcome of inquiries. The British government has set July 2014 as the target date for a final decision on whether to proceed with the project.

Ian Forrester, an antitrust lawyer in Brussels, said “these cases can take a very long time, certainly many months. However, they can also be accelerated.”

In London, the British energy minister, Michael Fallon, said he had “no reason to believe the commission will block it,” Reuters reported, and the spokesman for Prime Minister David Cameron said he was not aware of any specific objections from Brussels.

A more likely outcome would be one in which the commission outlined changes or imposed conditions in exchange for approving the deal. But the uncertainty caused by an inquiry could derail the timetable for reaching investment decisions on the project.


Hinkley Point would be the first nuclear power station to be built in Britain in nearly two decades. The government has portrayed the project as crucial to keeping the lights on in Britain and to reducing carbon emissions from electricity generation as the current aging fleet of nuclear power stations and coal-powered power plants are phased out in the next few years.

The twin reactors of the new plant would provide the equivalent of about 7 percent of Britain’s current power supplies. While nuclear power comes with drawbacks, like the possibility of major accidents and the still-unresolved issue of how to dispose of waste fuel, it is a low emitter of carbon dioxide.

The British government is providing what might be deemed to be huge subsidies for the plant by guaranteeing a price of 92.50 pounds per megawatt hour, almost twice the current wholesale rate. The tariff will be indexed to inflation for the 35-year expected life of the power station. The government will also guarantee about 10 billion pounds in loans for Hinkley Point.

Roland Vetter, an analyst at CF Partners, a commodities trading house based in London, forecast that EDF would receive more than 700 million pounds in subsidies during 2023, the first year the power station is expected to operate.

The government has devised a mechanism by which any shortfall in power prices would be made up by consumers, rather than the state, but some analysts question whether this approach would successfully skirt the issue.