Fitch Ratings has maintained its ‘neutral’ outlook for UK utilities, as higher electricity network investments should cut transmission curtailment costs and build distribution network capacity ahead of demand.

Fitch’s ‘improving’ outlook for the water sector is supported by the Cunliffe Review proposals targeting financial stability and regulatory consolidation. The CMA's determination, setting WACC 26bp above the final determination, with £550 million in additional allowances, should support companies on Negative Outlooks, which Fitch expects to review in 1H26.

Clean Power 2030 and NESO plans would roughly double installed capacity by 2030, while demand will likely rise by just 11%, heightening system-balancing challenges but reducing constraint payments as grid capacity expands.

In gas, the accelerated depreciation of new distribution assets will lower stranded-asset risk, and standby requirements support continued gas transmission. Household bills would see limited relief in 2026 despite an average £150 saving from April despite energy company obligation schemes ending and 75% of renewables obligation costs shifting to general taxation, because system-balancing and network costs will rise. Further relief would require reprofiling bills to increase later in the five year price control.

NESO’s future energy scenario plans, which will integrate 40–50 GW of offshore wind and 47 GW of solar, requires about 35 GW of standby gas and 23–27 GW of battery storage. This reinforces gas generation’s critical role despite low run-hours. Embedded balancing and rising network costs are reflected in the energy price cap and will be part of household bills.

Fitch expects to review gas distribution, and gas and electricity transmission rating thresholds after the final determinations publication this December. Debt capacity in gas distribution and gas transmission could reduce on net-zero transition risks. Ofgem’s constructive approach towards gas networks should keep stranded-asset risk low.