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

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 Nuclear Regulated Asset Base (RAB) model is a financing method designed to support the development of RIIO-3 regulates the revenue of energy network companies, including:

• Electricity Transmission
• Gas Transmission
• Gas Distribution

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

1. Massive investment in modern infrastructure
2. Consumer affordability and protection
3. Supporting the UK’s net-zero commitments

The decisions made during RIIO-3 will define the electricity and gas network landscape 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

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.