Page type: primary-anchored (mirrors RIIO-ED3 price control documents)
Last updated: 2026-04-05
RIIO-ED3: Electricity Distribution Price Control (2028-2033)
RIIO-ED3 is Ofgem's price control for the 14 electricity distribution network operators (DNOs) in Great Britain, running from 1 April 2028 to 31 March 2033. It follows RIIO-ED2 and runs on a separate timeline from the RIIO-3 controls for transmission and gas distribution (which started April 2026).
Current status: Methodology consultation phase. The Framework Decision was published in April 2025 and the Sector Specific Methodology Consultation in October 2025. Final Determinations are expected in late 2027.
Source: RIIO-ED3 canonical extraction
Why ED3 matters
The electricity distribution network is the final link between the high-voltage transmission grid and every home, business, factory, EV charger, and heat pump in the country. Unlike the transmission network (which carries power over long distances), distribution is local -- it is the network of substations, cables, and overhead lines that operates in every street and neighbourhood.
ED3 covers the period when electrification of heating and transport is expected to accelerate sharply. The National Infrastructure Commission projected in February 2025 that peak electricity demand will double by 2050, with load-related investment in distribution needing to reach £1.5-2bn per year during ED3 -- roughly double or triple current levels.
What is changing from RIIO-ED2
The shift from "flex first" to "build first"
The most significant policy change in ED3 is the reversal of the "flex first" approach used in RIIO-ED2. Previously, DNOs were encouraged to use flexibility procurement (paying customers to shift their demand) to defer physical network reinforcement. In ED3, Ofgem has concluded that this approach is no longer appropriate because demand growth is now considered sufficiently certain that deferral simply delays inevitable investment -- at potentially higher cost.
DNOs in ED3 will be expected to build network capacity ahead of need, using independent planning forecasts from NESO's Regional Energy Strategic Plans (RESPs) as their guide. Flexibility still plays a role -- for managing faults, outages, and intermittency -- but no longer as a substitute for network investment.
From incentive regulation to plan-and-deliver
RIIO-ED2 is primarily incentive regulation: DNOs receive totex allowances and are rewarded for spending less. This creates efficiency but also incentivises deferral of investment. ED3 moves to a hybrid:
- For network investment: A plan-and-deliver model where DNOs submit long-term integrated network development plans to 2050, are funded against those plans, and held accountable for delivery. Reduced flexibility to reallocate spending.
- For everything else (service quality, efficiency, innovation): Retained incentive regulation similar to ED2.
The Totex Incentive Mechanism (TIM) is retained but refocused on unit cost efficiency rather than total spend, so DNOs are rewarded for building cheaply but not for building less.
Long-term planning
Each DNO must produce an integrated network development plan looking out to 2050, covering load investment (capacity for new demand), non-load investment (asset replacement and maintenance), and climate resilience. These plans must be consistent with NESO's tRESP/RESP pathways and adopt a "touch the network once" principle -- when a DNO touches an asset, it should future-proof it for expected demand growth and climate change.
The 14 DNOs
The distribution network is operated by 14 separately-licensed DNOs, owned by six parent companies: UK Power Networks (3 licences), National Grid Electricity Distribution (4), Electricity North West (1), Northern Powergrid (2), SP Energy Networks (2), and SSE Networks (2). This is very different from the 3 transmission owners covered by RIIO-ET3, and means cost benchmarking across 14 companies is a powerful regulatory tool.
Key mechanisms
Outputs and incentives
ED3 retains most RIIO-ED2 incentive mechanisms with modifications: - Business Plan Incentive (BPI): Strengthened with staged rewards -- initial reward for plan quality, further reward contingent on delivery. - Interruptions Incentive Scheme (IIS): Retained; severe weather thresholds under review given increasing storm frequency. - Broad Measure of Customer Service (BMCS): Retained; amended to reflect rising connection volumes and new customer types. - Customer Vulnerability Incentive (CVI): Retained. - NARM (Network Asset Risk Metric): Retained and expanded to cover more asset categories; integration with long-term plans required. - Innovation (NIA + SIF): Retained; deployment rollout mechanism under consideration.
New for ED3: - Delivery incentives: Financial incentive for delivering against the agreed investment plan, penalising deferral. - Output delivery metrics: Aggregate measures such as net capacity added per grid supply point region. - DSO incentives: Potential financial incentive for Distribution System Operator outcomes (voltage optimisation, network loss reduction). - Connection incentives: Strengthened, flowing from the end-to-end connections review.
Uncertainty mechanisms
Ofgem plans to rationalise the number of re-openers compared to ED2, with: - Streamlined re-opener process - Pass-throughs for business rates and pension deficits - A resilience re-opener for government/NESO-mandated resilience activities (aligned with RIIO-3) - Volume drivers under review -- may not be needed given proactive approach
Financial framework
No financial parameters have been set yet. Key open questions: - Cost of capital / WACC: To be determined, likely drawing on RIIO-3 methodology - Regulatory depreciation: Ofgem is commissioning its own review. The interaction between 45-year asset lives, sharply rising capex, and financeability is potentially the most consequential financial decision - Investability: New concept being evaluated -- whether allowed returns are sufficient to attract the scale of capital needed - Financial resilience: Dividend restriction at certain gearing levels under consideration
Supply chain and workforce
Key pressures identified: - Transformer and GIS equipment lead times are 2-3x longer than pre-COVID - SF6 alternatives cost up to 40% more with 12-month longer lead times - Workforce aging: 30%+ over 50 at some DNOs - RIIO-ED2 allocated £360.4m for operational training - The APM (Advanced Procurement Mechanism) used in transmission has been considered but rejected for distribution due to different project profiles (high-volume, lower-value)
Bill impact
No headline figures published. The NIC projected £7.5-10bn in load-related investment for the ED3 period. Bills are expected to rise in the near term but Ofgem argues long-term costs fall as the system electrifies: - Avoided supply chain inflation from proactive investment: ~£2bn - Avoided GHG costs from timely decarbonisation: ~£5bn
Timeline
- November 2024: Framework Consultation
- February 2025: NIC electricity distribution review
- April 2025: Framework Decision, RESP framework decision, connections reform decision
- October 2025: SSMC published
- January 2026: tRESP delivered by NESO
- 2026: SSMD expected
- Late 2026: DNO business plans
- 2027: Draft and Final Determinations
- 1 April 2028: ED3 starts
- 31 March 2033: ED3 ends
Defined terms
See canonical source file for full defined terms register.
Cross-references
- RIIO-ET3 -- linked but separate price control for electricity transmission (started April 2026)
- Electricity Distribution Licence SLCs -- licence conditions to be modified at FD
- Electricity Act 1989 -- statutory foundation
- NESO RESP/tRESP -- strategic planning inputs
- NIS Regulations 2018 -- cyber resilience compliance
Character positions
No character positions recorded yet.
Debate
No secondary-source debate entries yet.