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DisCos Reject Order to Lock 70% of Revenue in CapEx Accounts
The Nigerian electricity distribution companies (DisCos) have rejected a new directive from the Nigerian Electricity Regulatory Commission (NERC) requiring them to set up dedicated capital expenditure (CapEx) accounts, calling it an intrusion into the management of privately owned utilities.
The directive, contained in Order No. NERC/2026/062, took effect on July 1, 2026, and mandates DisCos to remit a significant portion of their residual revenues into CapEx accounts after settling upstream market obligations and operating expenses.
For DisCos without debts, 70% of residual revenue must go into the CapEx account, leaving only 30% for operations. Those with debts must remit 25% to NBET, 25% to the Market Operator, 35% to CapEx, and retain just 15% for their own use.
One utility said, “NERC is, in effect, taking control of how DisCos spend their surplus revenue. Even a debt-free DisCo retains only 30%. Everything else is either owed to market participants or locked in a NERC-controlled account.”
Funds in the CapEx accounts can only be used for NERC-approved Performance Improvement Plan projects, with multiple approvals required before spending at each stage of project execution. DisCos argue this amounts to NERC assuming the role of company boards.
Another operator warned the directive could deter investors and encourage rent-seeking, “By attempting to get involved in contract awards, NERC is opening the door for contractors to lobby regulators. This appears more like a power grab.”
NERC defended the order, citing its review of 2025 revenues which showed some DisCos generated enough to cover expenses but failed to channel funds into infrastructure.
It said the directive was necessary to ensure resources were used for network rehabilitation, expansion, and improved supply, citing authority from the Electricity Act, 2023.
Stakeholders, however, warned that restricting 70–85% of revenues could weaken operational flexibility, impair emergency response, and discourage financing.
They also raised legal concerns, noting that affected licensees were not consulted before the directive was issued.
