NERC: New OpEx Spending Order Mandates DisCos' CapEx Transfers

• The Nigerian Electricity Regulatory Commission (NERC) has introduced a new order, NERC/2026/062A, to progressively restrict discretionary operational revenue for Electricity Distribution Companies (DisCos).
• From August 2026 to January 2027, debt-free DisCos must allocate 50% of earned non-administrative OpEx to CapEx accounts, retaining the other 50% for operations.
• Starting February 2027, the operational share will further decrease to 40%, with 60% of earned non-administrative OpEx mandated for CapEx accounts and approved investments.
• This order, dated September 4, reviewed and replaced an earlier directive, Order No: NERC/2026/062, which was issued on June 30, 2026.
• Some DisCos oppose the new framework, arguing that NERC is micromanaging private entities.

This progressive reduction underscores NERC's intention to steer more funds towards infrastructure development rather than discretionary operational spending, aiming to enhance the overall reliability and capacity of the electricity grid.

The Nigerian Electricity Regulatory Commission (NERC) has finalized a significant policy change, introducing a revised framework that will progressively limit the discretionary operational revenue available to Electricity Distribution Companies (DisCos). This move comes despite considerable opposition from the DisCos themselves, who have voiced concerns regarding the regulator's approach to their financial autonomy. The new directive, known as NERC Order NERC/2026/062A, specifically targets the utilization of earned non-administrative operating expenditure (OpEx) by successor distribution companies, aiming to reallocate funds towards critical infrastructure development.

Under the initial phase of this NERC new OpEx spending order, effective from August 2026 through January 2027, debt-free Electricity Distribution Companies Nigeria will be permitted to retain 50 percent of their non-administrative OpEx for their day-to-day operational requirements. The remaining 50 percent of these earned funds is mandated to be transferred into designated Capital Expenditure (CapEx) Provision Accounts. This order, officially titled “Revised Order on Successor Distribution Companies’ Utilisation of Earned Non Administrative Operating Expenditure,” was issued on September 4, marking a pivotal moment in the ongoing regulation of the nation's power sector.

The NERC Order NERC/2026/062A represents a substantial update to previous regulatory guidelines, specifically reviewing and replacing an earlier directive, Order No: NERC/2026/062, which had been issued on June 30, 2026. The current order, bearing the signatures of NERC's Chairman, Musiliu Oseni, and Vice Chair, Yusuf Ali, outlines a clear trajectory for the reallocation of funds within the Nigeria power sector regulation, emphasizing a shift from operational flexibility to capital investment.

A further tightening of the DisCos operational expenditure limits is scheduled to take effect from February 2027. At this point, the proportion of earned non-administrative OpEx that DisCos can allocate to their immediate operational needs will decrease significantly to 40 percent. Consequently, a larger share, 60 percent, will be required for CapEx accounts remittance Nigeria, specifically designated for approved investments. This progressive reduction underscores NERC's intention to steer more funds towards infrastructure development rather than discretionary operational spending, aiming to enhance the overall reliability and capacity of the electricity grid.

The implementation of this NERC new OpEx spending order has not been met without resistance from the Electricity Distribution Companies Nigeria. Several DisCos have openly expressed their disapproval, characterizing the Nigerian Electricity Regulatory Commission's actions as an overreach into the management of private entities. Their arguments suggest that such stringent controls on operational funding amount to micromanagement, potentially hindering their ability to respond flexibly to market demands and operational challenges, and impacting their autonomy as private businesses.

Despite these protests, the Nigerian Electricity Regulatory Commission has moved forward with the revised framework, signaling its unwavering commitment to the new financial structure. The regulator's stance indicates a clear prioritization of long-term capital investment within the power sector, aiming to improve infrastructure and service delivery through mandated CapEx accounts remittance Nigeria, even if it means imposing stricter DisCos operational expenditure limits and facing industry pushback. This regulatory intervention highlights the ongoing tension between private sector autonomy and public service obligations in Nigeria's electricity market.

Lawyers advising Electricity Distribution Companies (DisCos) in Nigeria must review the new NERC Order NERC/2026/062A to ensure compliance with the revised operational expenditure limits and capital expenditure remittance requirements, which significantly impact financial planning and investment strategies. Compliance officers should update internal policies to reflect the progressive reduction in discretionary OpEx and the increased allocation to CapEx accounts.

Source: Original reporting via THISDAY newspaper