Energy Unplugged by Aurora EP.269 – Ofgem’s Steve McMahon on Grid Investment, Faster Delivery and Net-Zero Needs
Dec 18, 2025
In this engaging discussion, Steve McMahon, Director for Network Price Controls at Ofgem, shares his insights on the pivotal RIIO-3 regulatory framework impacting UK energy networks. He reveals a staggering £28 billion upfront settlement aimed at accelerating the energy transition and addresses the need for continued gas investment amidst decarbonization challenges. Steve also explores innovative tools for faster grid upgrades, the balance between consumer costs and rapid funding, and the critical role of flexibility in meeting the surging energy demands.
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What RIIO-3 Actually Is
- RIIO is Ofgem's regulatory model for setting network revenues, incentives, innovation and outputs since 2013.
- RIIO-3 establishes funding for electricity transmission, gas transmission and gas distribution from April 2026 for five years.
Upfront Settlement Vs Full Investment
- Ofgem set an upfront £28 billion settlement but expects actual investment could exceed £90 billion over the five years.
- The £28 billion is only the immediate funding; a much larger pipeline is anticipated as projects crystallize.
Why Gas Networks Still Need Big Spend
- Large gas network spend reflects continued household reliance on gas for heating and the need to maintain safety and resilience.
- Transition away from gas is expected but uncertain, so networks must be supported for the coming five years.