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04 Dec 2025

News: Ofgem greenlights £28.1bn of grid investment through RIIO-3

Today, Ofgem published the next set of price controls – RIIO-3 – that apply to the Electricity Transmission, Gas Distribution, and Gas Transmission sectors. RIIO-3 (Revenues = Incentives + Innovation + Outputs) covers the five-year period from 1 April 2026 to 31 March 2031 and confirms £28.1bn of initial investment into electricity and gas network operators, with the aim of strengthening and expanding the UK’s energy grid.  

These Final Determinations come after the Draft Determinations were published in July 2025, at which point stakeholders were invited to provide feedback. RIIO-3 is a product of Ofgem’s evaluation of Business Plans submitted by network companies in late 2024, alongside responses from this consultation.  

 

Key Outcomes of RIIO-3: 

  1. Of the initial £28.1bn investment, £17.8bn will be invested in gas networks with the remaining £10.3bn allocated to electricity transmission. The £28.1bn is lower than the £33bn initially proposed by network companies.   

  1. Ofgem expects this initial commitment to rise to £90bn by 2031, reflecting an uplift from the original figure of £80bn in the Draft Determinations. 

  1. This represents a total of £108 added to bills by 2031 – £48 for gas and £60 for electricity. However, Ofgem states that RIIO-3 will deliver savings of around £80 as a result of expanding the grid, through reduced constraint payments and lower wholesale prices. Overall, Ofgem expects that the net increase in bills by 2031 will be around £30, potentially falling further over time. 

  1. Smaller business will see an increase in network charges, for example £9,760 for a medium factory – constituting a rise of between 5% and 10% on electricity bills for a typical business, before savings are accounted for.  

  1. RIIO-3 is intended to support the connection of new industrial demand by building out infrastructure, in line with the Government’s Industrial Strategy. 

  1. Data and digitalisation will be supported by the following:  

  • A Digitalisation licence condition, which requires companies to have and update a Digitalisation Strategy and a Digitalisation Action Plan, comply with Digitalisation Strategy and Action Plan (DSAP) Guidance, and comply with Data Best Practice (DBP) Guidance; 
  • Baseline funding of £876.7m (lower than the requested £958.3m); and 
  • A Digitalisation Re-opener to adjust funding during RIIO-3, ensuring the requirements set out in the Digitalisation licence condition are delivered. 

  1. Ofgem has decided not to implement a new Data Sharing Infrastructure (DSI) licence condition for the start of RIIO-3. Instead, this will be considered separately through consultation once the DSI is operational. 

 

techUK’s View: 

Investing in our grid is crucial to reviving our aging energy infrastructure, helping to drive decarbonisation, decentralisation, and re-industrialisation. We welcome the focus on anticipatory investment in RIIO-3 and Ofgem’s recognition of the importance of digitalisation as a means of generating value for consumers. High-quality and interoperable data will be central to creating a future-ready energy system. 

Yet this level of investment will inevitably lead to higher energy costs, at a time when the UK’s growth industries are already disadvantaged. Digital infrastructure is not currently supported by bill discounts, despite being an IS-8 sector, and now faces further rises.  

We believe in more innovative solutions to addressing systemic issues in the energy grid, such as self-build transmission infrastructure, enhancing domestic and non-domestic flexibility, and strengthening locational signals to ensure both generation and demand are more efficiently situated. Investment from network operators alone will not be sufficient and risks placing the burden on consumers. Whilst reducing constraint payments through network build out is an important step, this must be supplemented by measures to lower costs such as levy reform and more support for industry. 

 

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