The regulator, however, said it will set the revenue the grid operator can earn from the upgrade, which will be based partly on its experience in tendering contracts to own new transmission links to offshore wind farms.
The Hinkley Seabank (HSB) transmission project is estimated to cost nearly £650 million – setting a revenue allowance for National Grid to operate it for 25 years is expected to save consumers between £50 million and £100 million, according to Ofgem.
National Grid plans to start construction in early 2019 in order to meet Hinkley developer EDF’s 2024 connection date for the project.
A spokesperson from National Grid said: “We are committed to delivering the Hinkley-Seabank connection on time and to quality and Ofgem’s decision does not affect this.
“We will now review the detailed decision by Ofgem and consider all of our options prior to Ofgem formally implementing the proposals into our licence later in the year or early 2019.”
Ofgem has also confirmed tougher price controls for energy network operators that are expected to deliver savings of more than £5 billion to consumers.
The price controls set the revenue the companies can earn from charges to consumers.