Because we are a monopoly, we’re regulated by the energy regulator, Ofgem. Here, you can find out what this means.
Ofgem’s regulatory framework allows National Grid Electricity Transmision to earn revenue from three main sources:
Incentives + Innovation + Outputs
This framework is known as RIIO.
The RIIO model offers network companies incentives for innovation and securing investment, so they can develop sustainable energy networks at the lowest cost for current and future customers. Our revenues are calculated using Ofgem’s Price Control Financial Model (PCFM).
We submit our business plans to Ofgem, who reviews and assesses these for the regulatory period, which is known as a ‘price control’ period.
We're currently in the RIIO-T2 period, which began on 1 April 2021 and runs until 2026. You can find out more about the background of this price control on the Ofgem website.
To encourage us to provide additional benefits for consumers, Ofgem uses financial incentives. These can either be penalties or additional revenue (funded by our customers), depending on whether or not we meet Ofgem’s targets.
Ofgem incentivises us to find more efficient ways to work. If we can find cheaper solutions the benefit is shared between consumers and National Grid.
As part of the RIIO framework, there are funding mechanisims that encourage innovation across the energy industry. These funding mechanisms aim to help make the energy networks smarter, accelerate the development of a low carbon energy sector, and deliver financial benefits to consumers.
Under RIIO the outputs we deliver are clearly articulated and are linked to the calculation of our allowed revenue. These outputs have been determined through an extensive consultation process, which has given stakeholders a greater opportunity to influence the decisions.
View the Price Control Financial Model used to set FY24 charges. Please note this model supersedes the PCFM published by Ofgem in December 2022. The Re-published PCFM has been updated to reflect the forecast under-recovery of FY23 charges.
Download The Independent User Group's role is -
• To scrutinise and challenge company periodic business plans: Scrutinise and challenge the development of company regulatory business plans, consistent with Ofgem requirements
• To monitor, interrogate and enhance transparency of performance against commitments:
o Hold National Grid to account in delivering its business plan commitments by monitoring delivery and enhancing transparency
o Act independently and publicly share its assessment as the voice of National Grid’s stakeholders
o Shaping National Grid as the pathway to Net Zero is developed and challenging how it responds to external change
• To act as a critical friend for strategy, culture and processes in key areas:
o Provide input and challenge to National Grid’s priorities and activities
o Provide input and challenge to National Grid’s stakeholder engagement and ensure that it’s part of decision-making processes and plans
Ofgem’s role is to simulate the effects of competition. It does this by setting price controls – a ceiling on the amount we can earn from charges to use our network.
Ofgem governs our operation through our transmission licence, which sets out in detail what we need to deliver in order to earn revenue. More information can be found below.
Here you'll find documents that we must produce to comply with our electricity licence requirements to separate parts of our business.
If you have a question for us, want to find out where we are located or have a complaint, then you're in the right place.