Modifications to the RIIO-3 licences and associated documents

What changed

Ofgem has confirmed the licence modifications that give legal force to the RIIO-3 price control. The statutory consultation ran from 16 December 2025 to 16 January 2026; after reviewing responses, Ofgem decided to implement the modifications as drafted. They take effect on 1 April 2026 for electricity transmission, gas transmission and gas distribution licences. This is the operative step. Final Determinations set the numbers and the policy; the licence modification notices are what actually bind National Grid Electricity Transmission, the gas transmission and distribution operators, and NESO. From 1 April, the obligations and revenue allowances those companies are held to are the ones in the consolidated licence text, not the ones described in the Final Determinations narrative.

The modifications change Special Conditions, and some Standard and Standard Special Conditions, across the three sectors. Ofgem has published two notices of modification (one electricity, one gas), a "reasons and effects" decision document, consolidated clean and tracked-change licence texts, and the price control financial models (PCFM) and financial handbook (PCFH) guidance. The associated documents consulted on in December 2025, the detailed methodologies and guidance that sit underneath the licence conditions, have not been decided yet; those decisions follow in spring 2026.

What this means in practice

For the network companies, the binding document is now the consolidated licence, and the only reliable way to know what RIIO-3 requires of them is to read the modification notices and the tracked-change text against the Final Determinations. Final Determinations are a policy statement. Licence conditions are enforceable. Where the two diverge, the licence wins, and divergence between a published determination and the operative drafting is not unusual in a settlement this large. Anyone modelling RIIO-3 revenue, totex allowances, output incentives, or the cost of capital should be working from the PCFM and the Special Conditions, not from the Final Determinations summary tables. The "Decision on the RIIO-3 licence modifications: reasons and effects" document is where Ofgem explains any changes made between the draft licence and the final text, including any made in response to consultation; that is the first place to check for movement.

The financial machinery sits in the published models. The PCFM and WACC model define how allowed revenue is calculated annually, including the cost of equity, cost of debt, and the indexation mechanics that drive the largest single number in the settlement. The PCFH guidance chapters govern the in-period and close-out adjustments. For investors and counterparties pricing network company debt and equity, the operative WACC and the totex sharing factors are now fixed in licence form for the price control period; this removes the principal regulatory uncertainty that has hung over the sector since the draft determinations.

Who pays: network charges. RIIO-3 allowed revenues are recovered through transmission and distribution use of system charges (TNUoS, gas TO and GD charges), which flow through to suppliers and ultimately to consumers and to generators and large users via connection and use-of-system charging. The licence modifications fix the revenue envelope that those charges are set to recover. The level of allowed totex and the cost of capital are the two parameters that move bills most, and both are now locked in licence text from 1 April 2026. The distributional question, how much falls on domestic consumers versus industrial and commercial users versus generation, is determined by the charging methodologies, not by these licence modifications directly.

One specific item flagged in the consultation documents is SpC 9.24 CSNP Coordination (SPTL), the Special Condition governing Centralised Strategic Network Plan coordination for the Scottish transmission licensee. Network planning coordination obligations are part of the RIIO-3 settlement's response to the connections and strategic-investment agenda, and that condition is worth reading directly rather than relying on the Final Determinations description.

What happens next

The licence modifications are made and come into effect on 1 April 2026, the start of the RIIO-3 period. There is no further consultation on the licence text itself; the statutory process is complete and the modification notices are final, subject only to any appeal to the Competition and Markets Authority. Affected parties had until 17 January 2026 to respond to the statutory consultation; the window to challenge the licence drafting through that route has closed, leaving CMA appeal as the remaining avenue.

The open workstream is the associated documents. Ofgem consulted on the detailed methodologies and guidance, the documents that sit beneath the licence conditions and determine how they operate in practice, in December 2025, and has said decisions on these "will follow in Spring 2026." Until those are settled, parts of the operational detail of RIIO-3 are not finalised even though the licence framework is. Watch for the spring 2026 decisions on the associated documents, and for the first RIIO-3 PCFM run, which will produce the first set of allowed revenues calculated under the new conditions. The consolidated response logs and the reasons-and-effects document together show which consultation points Ofgem accepted and which it rejected, and are the fastest route to understanding what, if anything, changed between the December draft and the final licence.