NERC mandates DisCos to set aside 50% of operating revenue for electricity infrastructure upgrades

The Nigerian Electricity Regulatory Commission (NERC) has ordered electricity distribution companies (DisCos) to channel 50 percent of their earned non-administrative operating expenditure (opex) into capital expenditure (capex).

The revised order on the “utilisation of earned non-admin opex by successor DisCos,” signed by Musiliu Oseni, NERC chairman, and Yusuf Ali, the commission’s vice-president, was released on Wednesday.

Debt-free DisCos, according to the commission, are required to “remit 50 percent of their earned non-admin opex to capital expenditure (capex) provision accounts from August, increasing to 60% from February 2027”.

Earned non-administrative operating expenditure (Non-Admin OpEx) is the portion of operational revenue generated by DisCos, separate from basic office administration costs and it is subject to regulatory reinvestment rules.

Capex is spending on long-term infrastructure such as upgrading, expanding and rehabilitating the power network.

The commission said the directive is aimed at “accelerating network upgrades, improving service reliability, and ensuring that available revenues are invested in critical electricity infrastructure projects”.

Under the new order, DisCos are required to establish and maintain dedicated capex provision accounts to fund approved network rehabilitation, reinforcement, and expansion projects.

NERC said a portion of earned non-admin OpEx would be earmarked for the projects, with the amount determined partly by each DisCo’s debt profile.

The commission also directed that all projects financed through the Capex provision accounts must receive regulatory approval and be reported to the commission quarterly.

The order further requires DisCos indebted to the Nigerian Bulk Electricity Trading Company (NBET) and the market operator to complete debt reconciliation and submit commission-approved repayment plans within 180 days.

NERC said the revised order is intended to strengthen electricity distribution infrastructure, improve service delivery and promote greater financial discipline across the sector.

According to the commission, the revised order took effect from September 4, following a regulatory review of the companies’ revenue utilisation for the 2025 market cycle. (TheCable)