
Ofgem outlines transformational framework for local electricity networks to deliver clean power and support growth
· Ofgem has unveiled a new regulatory framework for the five-year funding period for local electricity distribution grids starting in 2028
· The upcoming price control period will deliver the step change in investment needed to deliver the Government's clean power mission and the wider electrification of the economy
· This new regulatory framework will pave the way for a cleaner, more resilient, lower cost energy system in the best long-term interests of consumers
Ofgem has laid out a blueprint for the landmark electricity distribution price control period starting in
This critical five-year investment period to 2033 will help unlock unprecedented investment to expand access to clean and affordable power in towns, cities and communities across
The ED3 framework responds to the recent recommendations from the then
This refreshed framework will guide the investment and delivery of crucial network services, focussing on four key areas:
· Networks for net zero: A more proactive approach to investment will ensure the networks are ready for a net zero future. Companies will be funded and then held firmly to account for delivering the infrastructure needed for our growing demands for electricity.
· Responsible and sustainable businesses: As with previous price controls, we'll drive network companies to minimise their environmental impact, and deliver excellent customer service, with a heightened focus on support for the more vulnerable customers. New measures will ensure that electric vehicle charging points, renewable generation as well as housing and industry can get connected to the local grids in a speedy and efficient way.
· Smarter networks: The digitalisation of the energy sector will be key to a more efficient and resilient system. In ED3, DNOs will need to enhance their data sharing and processing capabilities, and we will continue to use incentives and funding to drive innovation in how the network companies plan and operate their business.
· Resilient networks: As society becomes more dependent on electricity for its power, transport and heating needs, it is even more essential that DNOs are maintaining and replacing their assets to ensure sure their networks are reliable both for the present and future, and able to withstand future risks such as extreme weather events and cyber-attacks.
"The scale of the opportunity is clear, and it is vital we take a new strategic regulatory approach, enabling more planned, proactive investment in network capacity whilst ensuring speedier and more efficient connections of new technologies. We must also continue to consider the evolving roles and responsibilities of the DNOs in the net zero transition, particularly around the decarbonisation of heat and transport and improving energy efficiency.
"Taken together with the wider RII0-3 programme, these are our most consequential set of price controls that will see the biggest expansion grid expansion in a generation, paving the way towards a clean energy system that supports the wider electrification of the economy.
He added: "This significant programme of investment will be funded through energy bills. To ensure this is delivered in consumers interests both now and, in the future, we must establish a set of arrangements that attracts the scale of investment needed while maintaining a strong focus on cost control, with clear accountabilities on the companies for delivering the investment on time and to budget.
ED3 will see the fourteen electricity DNOs play a key role in delivering some of the biggest changes seen in a generation to
· The switch to a clean power system by 2030 which will be more dependent on low carbon power sources including a growing number of renewables such as wind and solar, which will need to be plugged into the grid
· More EVs (electric vehicles) are anticipated to hit roads with the Government's planned ban on the sale of new petrol and diesel cars from 2030
· The increasing electrification of heat with many more heat pumps expected to be installed in homes across the country
· Further anticipated growth of the electricity hungry AI and data centre sectors
· Increased flexible energy use with consumers increasingly using smart technology to time energy use with favourable tariffs
· A greater amount of regionalised planning via new Regional Energy Strategic Plans (RESPs)
The price control will determine funding available for DNOs to deliver work including the major expansion of the existing distribution network of around 800,000km of cables and wires which is envisaged by both NESO and the Government's
Through the ED3 price review process Ofgem will work with DNOs to:
· Provide increased certainty in investment needs, helping reduce costs and supporting investment across supply chains while establishing a sustainable and skilled workforce for the long term.
· Develop innovative solutions and business technologies to improve the day-to-day delivery of network services while meeting the challenges of a clean power system.
· Increase the security and resilience of critical local infrastructure, ensuring high standards of asset stewardship are maintained while developing improved responses to the growing issues of climate related weather disruption and cyber threats.
· Ensuring the sector remains financially robust, with stable and predictable regulation enabling the step change in new capital investment to be injected efficiently for the benefit of current and future consumers.
For more information on the framework visit: https://www.ofgem.gov.uk/decision/framework-decision-electricity-distribution-price-control-ed3
Ofgem will now develop its methodology for the price controls, which will inform the DNOs business plans for 2028 to 2033, which Ofgem expects to receive in late 2026.
Ends
Notes to editors
Next steps
Ofgem will now develop its detailed methodology for the price control period in line with this framework, setting out how it will be implemented in practice through service delivery, the use of incentives, our approach to assessing costs and establishing the overarching financial framework.
This will inform the spending plans which Ofgem expects to receive from DNOs in 2026.
The price control will then be further developed ahead of being finalised and coming into effect from
The electricity distribution networks and clean power
The electricity distribution system is at the heart of an unprecedented change in how and where electricity is generated and used. Enabling this transition to a more decentralised, cleaner and more digitally enabled electricity system is vital for wider economic growth, energy affordability and meeting net zero goals.
The companies that operate the electricity distribution networks in
Ofgem's Framework Decision sets out how the next price control (ED3) will deliver against the challenges and opportunities facing the electricity distribution sector.
Reforms to strategic planning and the way the connection queue is managed have wide-reaching implications for ED3, creating the opportunity for a fundamentally different, longer-term approach to network planning and investment.
At the same time, distribution networks must continue to provide high levels of resilience, particularly given the shift to an economy that is increasingly reliant on electricity for transport, heating and industry.
Evidence of the pace of change in the sector can be observed in the number of policy statements, decisions and industry reports that have been published since the ED3 framework consultation in November.
In
ED3 is central to the successful implementation of all these initiatives and reforms. Our Framework Decision has been heavily influenced by the imperative to ensure the distribution networks are enablers of
Providing the capacity and resilience to meet our future energy needs will require an increase in network investment and we are mindful of the consequence this will have for customer bills in the near-term. While we are confident that in the longer-term this investment will ultimately support a reduction in energy costs, we will remain focused on the affordability challenge facing many consumers. In setting the price control will seek to ensure that companies are only permitted to recover efficient costs so that the impact on bills is minimised.
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