LONDON: Britain’s energy regulator on Thursday published a final methodology governing how the nation’s electricity distribution networks will invest to keep pace with soaring demand between 2028 and 2033, imposing tighter cost controls and stronger consumer protections.
The Sector Specific Methodology Decision, or SSMD, sets the rulebook for assessing business plans from Britain’s five distribution network operators, which must submit their 2028-2033 proposals in December. The full Electricity Distribution Price Control settlement, known as ED3, is scheduled for approval by the end of 2027, a statement said.
The framework requires network companies to demonstrate that new investment is highly likely to be needed — even after deploying flexible technologies to maximize existing grid capacity. Operators must show projects will meet projected demand growth and prevent bottlenecks.
Ofgem said the five-year period represents a critical phase for expanding the existing 800,000-kilometer network, which serves 30 million customers. Planning will be based on detailed analysis including the National Energy System Operator’s transitional Regional Energy Strategic Plan published in January 2026.
Under the new rules, baseline capital allowances for essential grid investment will come with clear delivery conditions. Strict cost of capital rules will align with market conditions, and network revenues will be tied to performance and consumer service delivery.
The “build and flex” model becomes the default approach. Networks must maximize existing capacity using smart, flexible demand management — including smart electric vehicle charging, demand-side response, battery storage and controlled exports — before new physical upgrades are approved.
Tighter cost controls aim to prevent unnecessary, excessive or speculative upfront investment from being recovered through customer bills. Operators must improve identification of vulnerable customers, submit more robust delivery plans, strengthen power cut response and face financial penalties for failing to meet expectations.
The framework also introduces strengthened rules to accelerate grid connections for low-carbon technologies and major projects, with financial penalties for delays and rewards for strong performance.
“Our rulebook strikes a tough but fair balance in expanding grid capacity to meet the demands placed on them,” said Steve McMahon, Ofgem’s director of network price controls. “We will sign off new investment only where the strategic need is clear and networks have maximized existing grid capacity.”
The SSMD makes no assessment of overall investment, allowed revenues, penalties or their projected impact on customer bills. Ofgem’s draft determinations are expected next summer, with final decisions for each company due by the end of 2027. The new price control period begins April 1, 2028.
The five distribution network operators — UK Power Networks, National Grid Electricity Distribution, Scottish and Southern Electricity Networks, SP Energy Networks and Northern Powergrid — control 14 regional license areas across Britain.
