However, Ofgem said it will set the revenue National Grid can earn from the upgrade based partly on the regulator's experience in tendering contracts to own new transmission links to offshore wind farms.

The Hinkley–Seabank (HSB) project will cost £650 million and allow for the safe connection of EDF Energy's planned Hinkley Point C nuclear power station.

The project will also provide additional capability and relieve transmission constraints in the South West of England.

National Grid said it will review Ofgem's decision an consider all options before Ofgem formalises its proposals in the grid operator's licence later this year or early in 2019.

"Ofgem's decision does not affect our commitment to delivering HSB to time and to quality as per our licence obligations," it added.

Ofgem expects to deliver savings of more than 5 billion pounds to consumers through tougher price controls for energy networks.

The price controls set the revenue monopoly network owners can earn from charges to consumers.

(Reporting by Nina Chestney, editing by Louise Heavens)