Power Up: getting people the best deal for local grid upgrades

Today Ofgem publishes its decision on the design of the next price control for Distribution Network Operators (DNOs). DNOs are the companies that operate the infrastructure transporting power to and from homes and businesses across Great Britain. Today’s publication will shape how DNOs do that and how much that service costs between 2028–2033.

• Build and flex: In October 2025, Ofgem said ‘we want DNOs to reinforce their networks in anticipation of future demand’. This means building more. Today, it’s shifted that narrative to ‘build and flex’. It’s decided that DNOs should use flexibility (including consumers storing energy when it is cheap to consume later) to reduce some investment now in the electricity grid, where it doesn’t compromise consumer outcomes.
• Low-carbon tech (LCTs): The price control will incentivise DNOs to make sure consumers can connect to the grid more quickly and easily. This includes those wanting to install LCTs like electric vehicles and solar panels. DNOs will be funded to more proactively ‘unloop’ properties, giving people who share a cable with their neighbours their own unique supply. This could lower the costs and future waiting times for people to get LCTs.
• Reliability: The price control will require DNOs to do more to prevent people experiencing power cuts. This includes power cuts for people in poorly-served areas and in severe weather events like storms. DNOs must also be more consistent in supporting people when they are without power.
• Cost of capital: Ofgem has set out how it will calculate the return consumers pay to investors for providing money upfront to fund DNO activity.

As the statutory advocate for energy consumers, Citizens Advice works hard to represent consumers in the design of price controls. Our initial thoughts are below.

Build and flex

Ofgem had already identified that the speed at which electricity demand will increase is uncertain. Driven by various factors, including affordability pressures caused by the war in the Middle East, it has moved the narrative away from “build ahead of need”. It now wants more “targeted build so the network is ready when needed”. This could prevent people paying for infrastructure which won’t be needed for a while, and allow flexibility to play a greater long-term role in grid management.

This is the first price control which is influenced by the transitional Regional Energy Strategic Plans (tRESPs). These set out National Energy System Operator’s (NESO) view of the demand and infrastructure changes needed for decarbonisation. The tRESPs will form the starting point for DNOs’ build plans, but not necessarily the end point.

Still, analysis shows lowering expenditure on build doesn’t significantly impact bills. The energy crisis must focus minds on getting the best value for money from energy infrastructure investment, not putting it off. It’s critical to avoid the mistakes that the Independent Water Commission identified in the water sector, when between 2009–2024, ‘government and regulator pressure on bills played an important role in what can now be seen as underinvestment’.

So the use of flexibility should only delay build when it (a) is efficient to do so or (b) provides a long-term solution to manage the grid. Any initial savings from deferring build shouldn’t be counterbalanced by a higher cost to consumers later on. It’s clear Ofgem is thinking about how to manage this risk. It remains to be seen whether the design sufficiently delivers on that intent.

Further, we think funding flexibility should be done in a way that avoids adding complexity to the price control. We are unconvinced by calls for longer-term financing for flexibility. It’s a universal problem that 5-year price controls can deter confidence in investing longer term, which is one reason Regional Energy Strategic Planning (RESP) was set-up.

Low Carbon Technologies (LCTs)

DNOs have an important role to play in allowing consumers to install low carbon technologies. We welcome the smaller connections incentive, as well as the decision to fund more proactive unlooping. Ofgem’s approach needs to balance cost-efficiency with the speed of upgrades. Introducing a relative metric (which rewards high-performing DNOs and penalises poor-performing DNOs) alongside an absolute backstop in the smaller connections incentive could help.

It’s great that Ofgem wants to ensure DNOs are connections-ready. However, lack of data about the low-voltage network could hinder that. Not just in terms of consumer assets, but DNOs’ own assets. While DNOs are currently funded to improve monitoring and modelling, the data is not yet comprehensive or fully accurate. DNOs may favour a wider role in “enhanced co-ordination” of energy efficiency because it helps reduce the risk of them not knowing where upgrades are needed, and not being connections-ready. Ofgem should acknowledge if that is a benefit informing its decision and ensure that enhanced coordination does not distract DNOs from their core role. We also want to see transparency about any trade-offs DNOs make between efficiency and supporting a just transition as they carry out that role.

Reliability

We support Ofgem’s approach on reliability, which should help prevent power cuts and support those in power cuts more consistently. Our recent report, Lights Out, recommended improvements on power cuts support. It highlights that 3 times more people came to us in 2025 about power cut-related issues than they did in 2019. We’ll continue to engage with Ofgem and DNOs as they focus on power cut prevention and support.

And finally…the cost of all this

DNOs are still making a windfall on their Regulated Asset Value (RAV). Due to the way the current price control has been set up, they made an extra £1.1 billion just in the first year of the price control (ED2). High inflation allows companies to recover borrowing costs that significantly exceed the actual cost of borrowing, at a time when energy affordability is at the front of people’s minds.

Ofgem has decided to amend the future price control framework to prevent that happening again. However, DNOs have a social obligation. They must find ways to redirect the accumulating RAV windfall to support those suffering the worst effects of the affordability crisis.

To deliver long-term value for money for consumers, Ofgem needs to avoid making the same mistakes on financing made in the gas and electricity transmission price controls (RIIO-3). For instance, the inconsistency when adopting and implementing European comparators for the asset beta estimation. Ofgem has historically set the cost of capital too high. It can address this in next year’s Draft Determinations for the DNOs by taking into account recent transactions such as Engie acquiring UKPN. We set out our views here.

Citizens Advice, as the statutory advocate for energy, will work with Ofgem and DNOs over the next 18 months to ensure value for money for consumers now and in the future.