Network Innovation Allowance RIIO-2: Governance V4 update

Details of outcome

All respondents supported our proposal to alter the Network Innovation Allowance (NIA) RIIO-2 governance document to allow Distribution Network Operators (DNOs) to continue registering projects past 31 March 2026. We have decided to proceed with these modifications. 

The updated NIA RIIO-2 governance document comes into effect on publication, 18 February 2026, and will apply to electricity distribution licensees until the start of RIIO-ED3 on 1 April 2028. Gas transporter and electricity transmission licensees' projects and NESO's projects funded under RIIO-3 NIA allowances will be subject to the RIIO-3 NIA Governance Document. 

Gas transporter and electricity transmission licensees’ and NESO’s projects funded under RIIO-2 NIA can continue in the RIIO-3 price control period under the Carry-over Network Innovation Allowance (CNIA), which will cease to be effective on 30 September 2027. The CNIA will be set out in the gas transporter and electricity transmission licensees' RIIO-3 licence conditions. For NESO, the CNIA will be set out in Condition F2 of NESO’s ESO Licence.  For the purposes of the CNIA, this document serves as the RIIO-2 NIA governance document.

Read the full outcome

Original consultation

Consultation description

Distribution Network Operators (DNOs) were given a Network Innovation Allowance (NIA) for the first three years of RIIO-ED2. They were permitted to allocate this funding across the whole price control if projects were registered by 1 April 2026.

We published decisions regarding awarding additional NIA funding to DNOs for the final two years of RIIO-ED2 in August and October 2025. We stated in both decisions our intention to change the RIIO-2 NIA Governance Document to allow DNOs to continue registering projects past 31 March 2026. This consultation is proposing the changes to the governance needed to enact those amendments.

Who should respond

We welcome responses from:

• Distribution Network Operators
• anyone with an interest in innovation funding in the energy sector