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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchTransmission-company returns depend on two things working together: the regulator’s rules for recovering revenue and the company’s ability to deliver approved network work at an acceptable cost and on schedule. Tariffs or allowed revenue set the opportunity; allowed returns and investment approvals shape it; project awards can add specific work. None guarantees profit. Cost eligibility, financing, procurement, risk allocation and service delivery determine how much of the forecast economics is actually realized.
How do transmission companies make money?
Transmission companies own or operate high-voltage networks that move electricity between generators, substations and local distribution systems. In many jurisdictions, they do not simply charge whatever the market will bear. A regulator sets or reviews the revenue the network may recover, often through a price-control period, revenue determination or tariff framework.
That revenue is meant to support the costs and investment the regulator accepts, along with a return on the relevant capital base under the local rules. The exact formula differs by jurisdiction. A useful analysis therefore separates four things:
- Allowed revenue: the revenue the company is authorized to recover, subject to the applicable rules and adjustments.
- Allowed return: a regulatory input or permitted return measure, applied to a defined base under that framework.
- Actual financial performance: the result after financing costs, actual expenditure, efficiency incentives, adjustments and other company-specific factors.
- Service delivery: whether the company meets the output, reliability, construction or other obligations attached to the revenue.
An allowed return on equity (ROE) is not the same as an achieved ROE. Nor is the full value of an approved project revenue or profit: capital expenditure may be funded over time, recognized only under specified rules, and reduced by costs that fail regulatory scrutiny.
How tariffs and regulatory decisions shape returns
Regulators determine more than a headline tariff or ROE. They may assess operating and capital cost forecasts, decide which investments are justified, set efficiency expectations, and tie revenue adjustments or incentives to delivery. A company’s financial outcome consequently depends on the approved cost and investment base, how it is financed, and whether actual performance aligns with the regulator’s assumptions.
For example, Ofgem’s RIIO-2 transmission reporting framework in Great Britain tracks network-owner financial performance alongside output delivery. Its 2025–26 reporting instructions require operators to report cost, volume, allowed expenditure and output delivery under licence conditions. This is why an allowed-return figure alone cannot show whether a network owner has delivered the work or stayed within the relevant cost allowances.
A US example shows the distinction between allowed and actual ROE. FirstEnergy’s 2025 filing reported allowed ROE of 9.88%–12.7% for its FET stand-alone transmission entity and actual ROE of 9.8%. The filing also reported that a January 2025 Sixth Circuit ruling concerning an RTO-membership adder reduced an approved FET ROE by 0.5 percentage point. These are company- and case-specific figures from that filing, not a general US transmission rate or a forecast of current returns.
Revenue limits can also be reset after a regulator reviews a company’s application. In a 2026 release, the Energy Regulatory Commission of the Philippines (ERC) said it approved an annual revenue requirement of PHP 374.98 billion for NGCP for 2023–27, 15.28% below NGCP’s requested PHP 442.60 billion. The ERC described maximum annual revenue as a ceiling and said only costs and investment that passed scrutiny were included. That is an example of this Philippine decision, not a formula that can be applied to another country.
What a project award does—and does not—mean
A project award can give a transmission company a defined opportunity to build or provide network infrastructure, but award value, project capital expenditure and company profit are different measures. To understand the economics, identify who owns the asset, who finances construction, when revenue may begin, which costs are recoverable, how savings or overruns are treated, and what milestones or outputs the company must deliver.
The award route matters too. A project may be competitively tendered, directed to a particular network owner, or subject to a separate regulatory determination. Approval to undertake work does not by itself establish that every proposed cost will be recovered. Regulators may test whether procurement was appropriate and whether spending was prudent, efficient and reasonable.
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A recent Australian case illustrates how those decisions can affect project revenue. On 30 September 2026, the Australian Energy Regulator (AER) determined revenue for Transgrid’s NSW System Strength Project for 2026–31. The project includes 10 synchronous condensers at five sites. The AER treated contestable tender components differently from a non-contestable component and assessed whether the costs were prudent, efficient and reasonable. It allowed $385.6 million in nominal revenue through quarterly payments, $15.2 million (3.8%) below Transgrid’s proposal. A principal adjustment concerned provisional sums for specified risk events: instead, the AER addressed risks through an ex-ante capital-expenditure allowance and adjustment mechanisms. The determination also included efficiency incentives and specified revenue-adjustment provisions. Those amounts and treatments apply to this project and determination period.
In the Philippines, ERC rules issued in June 2026 created a pathway for parties other than NGCP to finance and construct designated Associated Transmission or Priority Projects. The rules set conditions for project approval, construction timelines, turnover and recovery. They also retain a prudency review and allow the ERC to determine fair and reasonable value before costs can be recovered. The opportunity to build is therefore linked to approval and recovery conditions, not simply to the project’s stated value.
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Transmission projects are capital intensive and can involve long equipment lead times, complex construction and delivery obligations. A forecast becomes less valuable if the project company bears costs that regulators do not recognize, faces financing costs it did not anticipate, or misses milestones tied to service or revenue adjustments. Assess the risks separately rather than treating an award or allowed return as a complete picture.
Cost control and cost eligibility
Compare forecast and actual spending by activity and cost category. Find out which overruns may be passed through or otherwise adjusted and which remain with the company. Ofgem’s reporting framework examines under- and overspend across activities and cost categories; the relevant treatment still depends on the applicable licence and regulatory rules.
Procurement and tender terms
Check whether the work is contestable, whether it was competitively tendered, and whether the regulator accepts the process and tender as genuine and appropriate. In the Transgrid determination, the AER assessed tender processes and treated contestable and non-contestable project components differently.
Risk allocation and adjustment mechanisms
Identify how specified risks are covered: a fixed allowance, provisional sums, insurance, an ex-ante capital allowance or a later adjustment mechanism may place risk differently between customers and the project company. In the Transgrid case, the AER did not allow the specified risk-event provisional sums as proposed; its decision used an ex-ante capital allowance and adjustment mechanisms instead.
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Track construction milestones and required network outputs, then check whether delay or shortfall can affect revenue, incentives, penalties or customer outcomes. Ofgem’s transmission reporting instructions collect both cost and output-delivery data, reflecting that financial performance and service obligations need to be considered together.
Supply chain and financing
Long equipment lead times can disrupt schedules, while construction funding, debt maturities and interest costs affect the economics of a capital-intensive business. FirstEnergy’s 2025 filing discusses utility capital needs and continuing supply lead times. A regulatory return assumption should therefore be read alongside the company’s financing and delivery context.
Regulatory change
Approved revenue, incentive adders, cost eligibility and adjustment rules can change. FirstEnergy’s disclosure of the 0.5 percentage-point ROE reduction following the January 2025 ruling is one specific example; it is not evidence that the same adjustment applies to other companies or jurisdictions.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to compare transmission companies or projects
Returns are meaningful only when the regulatory and project context is comparable. Before comparing percentages or revenue figures, align the following:
- Jurisdiction, regulator and regulatory period.
- Revenue or tariff method, allowed ROE or weighted average cost of capital, and the base to which it applies.
- Approved operating and capital expenditure, plus rules for recognizing actual costs.
- Whether the project was competitively awarded, directed or approved through a separate determination.
- Asset ownership, construction funding, revenue start, cost-overrun exposure and risk allocation.
- Delivery obligations, incentives, actual output and cost performance.
- Financing and supply constraints, and whether figures are nominal or real and cover matching periods.
A return percentage from one company cannot be generalized across the sector. Even within one jurisdiction, regulatory periods, project obligations and adjustments can differ. The examples here illustrate distinct mechanisms in Great Britain, the United States, Australia and the Philippines; they do not establish a common global tariff formula or an investment forecast.
In its 2026 release on NGCP’s revenue determination, the Philippine ERC described its objective this way: “The Commission remains committed to ensuring that transmission rates charged to consumers are just and reasonable, while at the same time allowing the transmission concessionaire to recover only efficient and necessary costs to maintain a reliable and secure power grid.” This is an institutional statement attributed to the Commission, not to a named individual.
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