RIIO

RIIO is the regulatory framework used by Ofgem, the UK energy regulator, to set price controls for the major energy networks that deliver electricity and gas to customers. The acronym RIIO stands for Revenue = Incentives, Innovation and Outputs. It was introduced in 2009–2010 to replace earlier price controls and to promote better outcomes for customers through longer-term planning and stronger incentives.

Under RIIO, price controls are set for multi-year periods, with network operators required to submit business plans outlining the outputs they will deliver and the costs they expect to incur. Ofgem then determines an allowed revenue that funds these outputs. The regime uses incentive mechanisms, notably output delivery incentives (ODIs), which reward or penalize performance against chosen outcomes such as reliability, safety, and service quality. It also includes funding for innovation and uncertainty mechanisms to account for unforeseen costs.

Scope: RIIO applies to electricity transmission and distribution networks and to gas transmission and distribution networks within Great Britain. It requires networks to plan for long-term requirements, including decarbonisation and resilience, and to engage with stakeholders in the process.

Impact and reception: Supporters argue RIIO aligns network incentives with customer outcomes, drives efficiency, and fosters innovation. Critics note complexity, potential for upside/downside risk, and the challenge of accurately predicting future costs and outcomes and ensuring consumer representation.

Current status: The RIIO framework is currently in its second cycle, known as RIIO-2, covering 2021–2026, with updates to reflect policy priorities such as decarbonisation, resilience, and enhanced customer engagement. Ofgem continues to refine the framework for subsequent periods.