The End of Utility Monopolies by Proxy

The End of Utility Monopolies by Proxy.

Splitbox Journal • Founder Notes

The assumption that a regulated monopoly is too big to fail has collapsed.

NERC has dissolved the board of Kaduna Electricity Distribution Company. A debt of N456.5 billion triggered the seizure. This is not a regulatory correction. It is a desperate salvage operation for a bankrupt model.

The 2013 privatization thesis relied on private capital to fix operational decay. That thesis is dead. The state has now become the operator of last resort. It is assuming 100% of the operational risk without the capital to fix the underlying wires.

This creates a governance vacuum. When the regulator runs the utility, there is no one left to police the performance. Equity in these entities is now structurally subordinated to market obligations. The exit strategy is no longer a turnaround. It is a regulatory takeover.

Investors must re-evaluate the risk premium on infrastructure debt. Avoid equity positions in utilities with high Market Operator default ratios. The protection of a monopoly status is worth nothing without technical competence.

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— Splitbox Journal