The Nigerian Electricity Regulatory Commission (NERC) has revised the rules governing how electricity distribution companies (DisCos) use their earned non-administrative operating expenditure, with debt-free DisCos now required to channel 60 per cent of the applicable revenue into capital expenditure from February 2027.
Under Order No. NERC/2026/062A, issued on September 4 and published by the commission on September 9, NERC said debt-free DisCos will operate a 50:50 arrangement between August 2026 and January 2027.
During the six-month transition period, 50 per cent of their applicable earned non-administrative OpEx will be transferred into dedicated CapEx Provision Accounts, while the remaining 50 per cent can be retained in their operations accounts.
From February 2027, the CapEx share will rise to 60 per cent, leaving the DisCos with 40 per cent for operational needs.
The funds transferred into the dedicated CapEx accounts are to be used for projects approved under the DisCos’ Performance Improvement Plans (PIPs).
NERC said the framework followed an open-book review of the DisCos’ utilisation of earned non-administrative OpEx for the 2025 market cycle. The review found that while several DisCos did not recover enough revenue to meet their upstream market obligations, some recovered revenue above those obligations.
The revised order also provides a separate allocation formula for DisCos with outstanding obligations to the Nigerian Bulk Electricity Trading Plc (NBET) or the Market Operator.
Between August 2026 and January 2027, an indebted DisCo is required to allocate 25 per cent each to NBET, the Market Operator, its CapEx account and its operations account.
From February 2027, the allocation changes to 25 per cent for NBET, 25 per cent for the Market Operator, 30 per cent for CapEx and 20 per cent for operations.
Where a DisCo owes only one of NBET or the Market Operator, the share that would ordinarily go to the other entity is also to be transferred into the CapEx Provision Account.
The September order replaces NERC’s earlier Order No. NERC/2026/062 issued on June 30. The earlier order had required debt-free DisCos to channel 70 per cent of the applicable revenue to CapEx and retain 30 per cent for operations.
The revised framework therefore reduces the immediate CapEx requirement but introduces a 60 per cent allocation from February 2027.
NERC said the measure is intended to ensure that available funds are deployed towards distribution infrastructure, including feeder rehabilitation, network reinforcement and other projects contained in the approved Performance Improvement Plans.