DisCos Reject NERC’s CapEx Account Directive, Allege Regulatory Overreach
DisCos Oppose New Regulatory Requirement
NIGERIA’S Electricity Distribution Companies (DisCos) have opposed a directive issued by the Nigerian Electricity Regulatory Commission (NERC) mandating operators to establish dedicated Capital Expenditure (CapEx) Provision Accounts, arguing that the measure amounts to excessive regulatory intervention in privately generated revenue.
The companies contend that the directive, which took effect on July 1, shifts significant control over their internally generated funds from corporate boards to the industry regulator.
Order Introduces New Revenue Allocation Framework
Under Order No. NERC/2026/062, electricity distribution companies without outstanding market debts are required to transfer 70 per cent of eligible non-administrative operating revenue into a dedicated CapEx account, while retaining the remaining 30 per cent for operational expenses.
The order imposes more stringent conditions on DisCos with unresolved upstream market obligations. Such operators are required to allocate 25 per cent of residual revenue to the Nigerian Bulk Electricity Trading Plc (NBET), another 25 per cent to the Market Operator (MO), and 35 per cent to the CapEx account, leaving only 15 per cent for operational activities.
Where a distribution company owes either NBET or the Market Operator alone, the portion ordinarily allocated to the other entity will also be transferred into the CapEx account.
According to the directive, funds deposited into the account may only be utilised for projects approved under each company’s Performance Improvement Plan (PIP).
NERC Defends Directive
NERC said the new framework followed its assessment of the 2025 electricity market cycle, which indicated that some distribution companies generated sufficient revenue to meet administrative costs and recover tariff components but failed to settle financial obligations to upstream market participants.
The commission said the policy is intended to ensure that a greater proportion of available resources is invested in electricity network rehabilitation, infrastructure upgrades and service improvements.
It added that the initiative complements ongoing sector reforms, including the World Bank-supported Distribution Sector Recovery Programme (DISREP) and the Presidential Metering Initiative (PMI).
Regulator Cites Electricity Act
NERC maintained that the directive is backed by Sections 34(1) and 116(2) of the Electricity Act 2023, which empower the commission to regulate the electricity industry in a manner that promotes operational efficiency and encourages prudent investment.
The regulator also directed distribution companies with outstanding upstream debts to complete reconciliation processes with the Nigerian Bulk Electricity Trading Plc and the Market Operator within 180 days.
The disagreement highlights continuing tensions between electricity distribution companies and regulators over revenue management, infrastructure investment and the financial sustainability of Nigeria’s power sector.
