NERC Orders Discos to Channel Non-Admin OPEX to Network Upgrades

By Adedapo Adesanya

The Nigerian Electricity Regulatory Commission (NERC) has issued a revised order directing successor electricity distribution companies to use part of their earned Non-Administrative Operating Expenditure (Non-Admin OpEx) to fund critical electricity distribution network improvement projects.

The directive followed a regulatory review of how DisCos utilised their revenues during the 2025 market cycle. NERC said the measure is intended to accelerate investment in distribution infrastructure, improve electricity service reliability and ensure that available revenues are channelled towards projects that strengthen the network.

Under the revised framework, discos are required to establish and maintain dedicated Capital Expenditure (CapEx) Provision Accounts. These accounts will hold funds earmarked for approved network improvement projects.

NERC said a portion of each DisCo’s earned Non-Admin OpEx will be specifically allocated to network rehabilitation, reinforcement and expansion, with the amount partly determined by the individual DisCo’s debt profile.

For debt-free DisCos, the Commission directed them to remit 50 per cent of their earned Non-Admin OpEx into their respective CapEx Provision Accounts beginning August 2026.

The contribution will rise to 60 per cent from February 2027.

The new arrangement is designed to ensure that a larger share of revenues available to financially stronger DisCos is invested in distribution infrastructure rather than being used solely for operational expenses.

NERC also stipulated that all projects financed through the CapEx Provision Accounts must receive prior approval from the Commission.

Discos must additionally submit quarterly reports on the implementation of projects funded through the accounts to strengthen regulatory oversight and transparency.

The revised order also addresses outstanding financial obligations owed by DisCos to the Nigerian Bulk Electricity Trading (NBET) Plc and the Market Operator.

DisCos with outstanding debts to NBET and the Market Operator are required to reconcile their liabilities and submit Commission-approved repayment plans within 180 days.

NERC’s latest directive comes amid persistent concerns over the financial and operational sustainability of Nigeria’s electricity distribution system, with inadequate network infrastructure remaining a major constraint to reliable electricity supply.

By tying part of discos’ earned operating expenditure to capital investment, the regulator is seeking to ensure that revenues generated within the distribution segment contribute directly to the rehabilitation, reinforcement and expansion of electricity networks.

The Commission said the framework is intended to strengthen distribution infrastructure, improve service delivery and promote greater financial discipline across the electricity sector.