Ofgem publishes RIIO-3 Final Determination

Ofgem published its Final Determination for RIIO-3, covering the gas and electricity transmission companies and the gas distribution networks, on 4 December 2025¹. The regulator set out the decision in its written response to the Energy Security and Net Zero Committee, submitted on 11 February 2026 and first published as correspondence on 25 February 2026¹.

RIIO, which stands for Revenue = Incentives + Innovation + Outputs, is the framework Ofgem uses to set revenues reflecting the efficient costs of running and financing gas and electricity infrastructure, costs that feed through to suppliers and to customer bills¹. Ofgem said it had tightened elements of the framework to minimise costs to consumers while still enabling critical investment, including updating cost, financial and tax assumptions to the current macroeconomic environment, protecting consumers from future inflation spikes, and setting allowances for specific projects only once need, scope and cost are more certain¹.

"Our Final Determination for RIIO-3 for the gas and electricity transmission companies and the gas distribution networks was published on 4 December 2025 and we believe the determination marks a clear step forward towards a clean, secure, and affordable energy system for consumers."

Network costs are one element of a household bill. Ofgem's figures for the price cap period January to March 2026 put wholesale gas and electricity at around 35% of a typical domestic bill, policy costs set by Government including support scheme levies at around 17%, network costs at about 23%, and supplier operating costs including an EBIT allowance at 18%¹. Ofgem states it has regulatory oversight of the network costs element only, and that it cannot unilaterally reduce energy costs for businesses or consumers¹.

Source: Ofgem response to the Energy Security and Net Zero Committee¹

The same response covers energy debt and the proposed Energy Debt Relief Scheme. Ofgem reports domestic consumer energy debt of £4.43 billion by June 2025, up 71% since 2023, with 2.44 million consumers in debt¹. A statutory consultation on how the scheme will work ran until 18th December 2025¹. Ofgem intends to deliver it in two phases during 2026: Phase 1 would write off historic eligible debts incurred between April 2022 and March 2024 for customers confirmed as eligible for means-tested benefits, which Ofgem says should help 200,000 customers and remove up to £500 million of debt stock; Phase 2 would target customers not eligible for Phase 1 but in genuine payment difficulty¹. Ofgem does not agree with the Committee's recommendation that network windfall profits should fund the scheme, and proposes instead to recover its costs from domestic customers through standing charges for electricity and volume charges for gas¹.

Why it matters for households

Network costs are a regulated slice of every household bill, and the RIIO-3 determination fixes the revenues that underpin that slice for the transmission companies and gas distribution networks¹. Because Ofgem sets those revenues rather than the wholesale market, the determination is one of the few bill components a regulator controls directly, and it sits alongside the price cap rather than inside it. For a household weighing up energy independence, whether through reducing consumption or generating and storing its own power, the network charge is the part of the bill that remains payable even when imported units fall, since it recovers the cost of the wires and pipes themselves. The debt figures and the proposed scheme concern a separate question, how historic arrears are cleared and who pays for that, with Ofgem proposing recovery from domestic customers rather than from network profits¹.

What happens next

The Energy Security and Net Zero Committee published its report Tackling the energy cost crisis (HC 736) on 29 October 2025; the Government's Response was received on 5 January 2026 and published as the Committee's Fourth Special Report on 21 January 2026¹. Ofgem's response was submitted on 11 February 2026¹. The Energy Debt Relief Scheme is intended to be delivered in two phases through 2026, with Phase 1 covering eligible historic debts from April 2022 to March 2024¹. Ofgem says it will set out further thinking on the timing of reforms to Additional Support Credit, and on access to credit in the energy sector, as its strategy evolves¹. No further dates for the RIIO-3 process itself are given in the response.

Sources1 cited

1. Tackling the energy cost crisis: Ofgem Response, publications.parliament.uk