RIIO-3 Final Determinations for the Electricity Transmission, Gas Distribution and Gas Transmission sectors

What changed

Ofgem published Final Determinations for RIIO-3 on 4 December 2025, setting allowed revenues for the three transmission and gas network sectors over 1 April 2026 to 31 March 2031: Electricity Transmission (NGET, SHET, SPT), Gas Distribution (Cadent, NGN, SGN, WWU) and National Gas Transmission. This is the binding settlement, not a consultation. It follows the Draft Determinations and the responses to them, and it locks the numbers that licence modifications will now give legal effect.

The source page does not disclose the headline figures. The decision lives in the overview document, eleven company-specific annexes, the finance annex, the impact assessment, and the financial models. What matters about the structure is what is unchanged: RIIO-3 keeps the RIIO architecture, allowed revenue equals a return on the Regulatory Asset Value plus efficient costs plus incentive adjustments. The cost of capital is set on the RAV. That is the spine, and the question for anyone reading the annexes is not whether the framework changed but where the parameters moved: the allowed equity return, the cost of debt indexation, the totex allowances, the strength of the output incentives, and the breadth of the uncertainty mechanisms that let allowances reopen mid-period.

What this means in practice

The networks are a regulated monopoly funded through use-of-system charges that sit in the network cost component of every electricity and gas bill. Whatever Ofgem allowed the eleven licensees, consumers pay it, spread over the five years and beyond through depreciation of the asset base. The allowed return on equity is the single most consequential number: it is applied to a multi-billion-pound RAV every year, so a swing of 25 basis points is a large absolute transfer between consumers and network shareholders. Read the finance annex for the equity return, the notional gearing, and the cost of debt mechanism before anything else.

The structural point holds regardless of the parameter values. RIIO pays a return on capital deployed, not on energy delivered. A network company maximises regulated profit by growing the RAV, because the return is levied on the asset base. Electricity Transmission is where this bites hardest in RIIO-3: the connection queue and the transmission build-out for offshore wind and the strategic network mean NGET, SHET and SPT are in a heavy investment phase, so their RAVs and their allowed revenues rise fastest. That is the Averch-Johnson incentive operating exactly as designed. The relevant question in the annexes is whether the totex incentive sharing factors and the output delivery incentives are calibrated tightly enough to claw back inefficiency, or loose enough that the build-out is rewarded whether or not it is used.

Gas distribution and gas transmission face the opposite pressure. These are mature, fully depreciating asset bases serving a fuel whose long-run demand is policy-constrained. The live issue in the gas annexes is asset stranding: how fast Ofgem lets the gas networks recover their RAV through accelerated depreciation, and who bears the cost of assets that may not be used for their full accounting life. Faster depreciation raises bills now to protect against a larger stranded cost later. That allocation decision is in the gas distribution and National Gas Transmission determinations and is worth more scrutiny than the headline return.

Uncertainty mechanisms are the part most likely to matter in money terms over the five years. RIIO-2 made heavy use of re-openers and volume drivers; RIIO-3 carries them forward and the strategic transmission investment framework adds more. Every uncertainty mechanism is an allowance that is not fixed at the determination and can reopen on the company's application. The wider these are, the less the five-year number constrains anything, and the more the determination is a starting point rather than a settlement. The impact assessment and the company annexes set out which mechanisms apply to whom.

What happens next

The settlement takes effect on 1 April 2026, immediately after RIIO-2 ends on 31 March 2026. Before then Ofgem implements the determination through statutory licence modifications, listed on the page as "Modifications to the RIIO-3 licences and associated documents." Those modifications carry a separate appeal route: a licensee that rejects the determination can refer it to the Competition and Markets Authority, as several did at RIIO-2, and a CMA reference can adjust individual parameters without reopening the framework. Watch for references in the weeks after publication.

An errata tracker is already attached, and Ofgem has flagged that some financial model files are not fully accessible, so expect corrected files and clarifications during the implementation window. Within the control period the mechanics are annual: licence revenues are set each year through the price control financial model, the cost of debt is indexed annually, and the uncertainty mechanisms and re-openers run on their own application windows. The first practical signal of how RIIO-3 lands will be the April 2026 use-of-system charges, which translate the determination into the per-unit transmission and distribution charges that generators and suppliers actually pay.