RIIO-3: What It Means for UK Businesses and Energy Costs

Section

Check out our LinkedIn for live updates

Published: 26/08/2025

The UK’s energy networks are entering a new phase of transformation with RIIO-3 (Revenue = Incentives + Innovation + Outputs) — Ofgem’s third performance-based price control framework. Running from 1 April 2026 to 31 March 2031, RIIO-3 will shape how energy network companies operate, how much revenue they can recover, and ultimately how much businesses and consumers pay for energy. At Flame Energy, we’re keeping a close eye on these changes so our clients can prepare for the impact.

What Is RIIO-3?

The RIIO-3 framework governs how much revenue the monopoly operators of Great Britain’s electricity and gas networks are allowed to earn. It is Ofgem’s latest price control framework and applies to regulated network companies, including:

Electricity Transmission
Gas Transmission
Gas Distribution

It replaces RIIO-2 and is designed to balance three key priorities:

Delivering the investment needed to modernise the UK’s energy infrastructure
Protecting consumers by ensuring value for money and affordable network charges
Supporting the UK’s transition to a secure, low-carbon energy system

The decisions made during RIIO-3 will shape Britain’s electricity and gas networks for the next decade and beyond.

Key Milestones in RIIO-3

Sector-Specific Methodology Decision (SSMD) – Published in December 2023, setting the regulatory approach for each sector.
Business Plan Guidance – Released in July 2024, providing network companies with clear expectations.
Draft Determinations – In July 2025, Ofgem proposed £24.2 billion in expenditure allowances for electricity transmission alone, with total investment potentially exceeding £95 billion.
Industry Response – The Energy Networks Association (ENA) welcomed the scale of investment but highlighted the importance of affordability and maintaining investor confidence.

Why Does RIIO-3 Matter for Businesses?

Network charges currently make up 20–25% of electricity bills. With billions of pounds set to be invested in new transmission lines, substations, and digital infrastructure, these costs will rise.

Ofgem has stressed that consumer protection is central to RIIO-3. Mechanisms are in place to cap returns, trim unnecessary costs, and smooth out price increases over time. However, the financial impact on businesses will still be noticeable.

Estimated Annual Bill Impacts

Customer Type	Estimated Annual Impact	% of Electricity Bill
SME (£50–100k/year)	£500–£2,000	1–2%
Medium Enterprise (~£500k)	£5,000–£15,000	1–3%
Large Industrial (>£1M)	£10,000+	1–3%

Preparing for RIIO-3 with Flame Energy

RIIO-3 represents both a challenge and an opportunity. While bills are expected to rise, the huge investment in energy infrastructure will support decarbonisation, improve reliability, and create opportunities for businesses to align with the net-zero transition.

At Flame Energy, we work with businesses of all sizes to:

Support businesses in navigating regulatory changes
Analyse and manage energy costs
Identify efficiency improvements
Explore renewable energy solutions

Final Thoughts

RIIO-3 is a pivotal moment for the UK’s energy system. The next five years will bring unprecedented investment in modern, low-carbon infrastructure — but also new pressures on business energy bills. By understanding the framework now and planning ahead, businesses can protect themselves against rising costs while contributing to a more sustainable energy future.

Looking to prepare for RIIO-3? Contact Flame Energy today to discuss how we can help your business manage energy costs and embrace the opportunities of the net-zero transition.