RIIO-ET3 Draft Determinations suggest high TNUoS costs

The DD figures suggest that the allowed revenues for ONTOs in 2026-27 are 82% higher than those in 2025-26 (without accounting for inflation). They’re also 50% higher (once adjusted for inflation) than NESO suggested in its initial view of draft tariffs for 2026-27. This forward view from NESO already predicts an average 25% increase to standing charges across consumers, and the DD’s due to add a substantial further uplift to charges in 2026-27. The figures below are from Ofgem’s impact assessment.

Projected price control revenue for RIIO-ET3, £bn, 2025/26 prices

Source: Ofgem Draft Determinations Impact Assessment

Impact Assessment

In its associated impact assessment, which it published alongside the DD, Ofgem used domestic customers to assess the impact of the increased revenues. The regulator states it expects: “a rise in the RIIO-related ET (electricity transmission) standing charge from around £45 currently to £80 by 2026 and £115 by 2031." These costs don’t account for forecast inflationary uplift, which is necessary to arrive at accurate out-turn forecast prices for future years.

However, Ofgem states that, without enabling the substantial network reinforcement as part of the RIIO-ET3 investment, the rises could be even more substantial.

It warns that without the RIIO-ET3 investment, balancing charges (BSUoS) for a dual fuel domestic customer in 2030-31 could be as high as £176 per year (in 2025-26 prices). As it is presently charged volumetrically, this implies BSUoS charges in the region of £65/MWh. With RIIO-ET3 investment and no delays, the regulator’s analysis brings this figure down 72% to an inferred £19/MWh in the same year. Ofgem also predicts that wholesale prices could be lower as the result of RIIO-ET3 investment enabling more renewable assets to connect.

BSUoS charges for a typical dual fuel customer in 2030-31 under various scenarios (2025-26 prices)

Source: Ofgem Draft Determinations Impact Assessment

Overall, Ofgem states that “the net bill impact of RIIO-3, relative to a scenario where the RIIO-3 investment is delayed, should be relatively small for the majority of non-domestic consumers, assuming that the projected effects of avoiding balancing costs and reducing wholesale bills are achieved in the RIIO-3 period.” However, it outlines that Energy Intensive Industries (EIIs) will see a lower bill as a result of the investment. This is because electricity transmission’s a relatively small component of the bill (due in part to the Network Charging Compensation rebate scheme that EIIs benefit from) compared to wholesale costs.

Ofgem recognises that there are a number of sensitivities and acknowledges it’s made assumptions in generating this analysis, which it outlines in the impact assessment. There will also be uncertainty in the total allowed revenues allowed as part of the final determination, and companies performance against uncertainty mechanisms and incentives within the price control period.

The price control process

Network price controls are significant multi-year negotiations between network companies and the regulator. They apply to the regulated entities that operate the electricity and gas transmission and distribution networks, and determine the allowed revenues that Ofgem permits these companies to make.

While Ofgem defines the sector-specific methodology and parameters for the price control, companies’ business plans mark the first point in potentially understanding the costs for the price control period. Where the business plan has historically marked the high point of the negotiation process, the DDs have historically been the low point. Final determinations typically lie somewhere in between the two, but we won’t know the final determinations until Ofgem makes its decision, expected for RIIO-ET3 in Winter 2025.

The National Energy System Operator (NESO) is due to publish final TNUoS tariffs for 2026-27 by the end of January 2026.

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