Proposed closeout methodology for Network Asset Risk Metric and RIGs: RIIO2

Details of outcome

We consulted on our proposed methodology and reporting requirements for assessing Network Asset Risk Metric (NARM) performance at the end of the RIIO-2 price control period.

NARM links network company funding to the management of network asset health and risk. It supports the long-term stewardship of critical network assets and helps ensure that consumers receive value for money.

After considering the consultation responses, we have decided to implement the RIIO-2 NARM closeout methodology, subject to the amendments explained in our decision.

The closeout methodology provides a consistent approach for:

• assessing delivery against companies’ Baseline Network Risk Outputs
• accounting for changes in risk outside companies’ control
• considering evidence for over-delivery and under-delivery
• assessing Clearly Identifiable delivery elements
• determining any resulting funding adjustments or penalties
• considering electricity and gas transmission projects that continue from RIIO-2 into RIIO-3

We have made changes to improve the clarity, consistency and practical application of the methodology. These include clarifying project status definitions, reporting and evidence requirements, the treatment of Clearly Identifiable delivery elements, and the treatment of RIIO-2 and RIIO-3 crossover projects.

We have also decided to issue updated NARM Regulatory Instructions and Guidance and associated reporting templates for electricity transmission, gas transmission and gas distribution licensees. The statutory decision and RIGs set out the final Year 5 reporting requirements.

The detailed closeout methodology, RIGs and reporting templates are published separately on the related RIIO-2 Network Asset Risk Metric reporting and closeout guidance page.

Read the full outcome

Original consultation

Consultation description

We are consulting on our proposed methodology to make sure it is clear, proportionate and can be applied consistently across electricity transmission, gas transmission and gas distribution.

The methodology explains how we will:

• assess delivery against baseline risk outputs
• determine funding adjustments
• apply penalties where delivery is below expectations
• treat clearly identifiable elements, changes in risk outside companies’ control, and projects that extend into RIIO‑3 price controls

We are also consulting on proposed modifications to the NARM Regulatory Instructions and Guidance (RIGs) and reporting templates. These templates will form the basis for companies’ NARM closeout submissions. We are consulting on the methodology and the RIGs together so companies can see how the closeout assessment process and the reporting requirements fit together.

Network companies can use the methodology, RIGs and reporting templates to prepare their NARM closeout reports. Companies must submit their NARM closeout reports under Special Licence Condition 3.1 by 31 October 2026.

The methodology should be read alongside:

• the NARM Handbook v4.0
• relevant RIIO‑2 licence conditions
• Regulatory Instructions and Guidance (RIGs)

Who should respond

We would like views from:

• electricity transmission licensees
• gas transmission and gas distribution networks
• anyone with an interest in network asset risk, regulation, and RIIO price controls
• anyone involved in regulatory price control closeout, asset management, regulatory reporting and NARM

Note: Some documents listed below are not fully accessible. If you require an alternative format, please contact assetriskresilience@ofgem.gov.uk.