The government of former Nigerian President Olusegun Obasanjo paid $50m (£25m) to non-existent companies, a parliamentary panel alleges.
The former government spent billions on the energy sector
The investigative committee said the money was paid as the administration said it was trying to improve the poorly performing power industry.
Committee chairman Ndidi Elumelu said the 34 companies were not registered and so did not exist.
But former ministers quizzed by the committee denied the funds were stolen.
The panel was established earlier this year to find out what happened to money spent on improving power generation between 1999 and 2007.
President Umaru Yar'Adua has said $10 billion was spent with little sign of improvement to electricity supplies.
Nigeria is a big exporter of oil but suffers from severe energy shortages which produce frequent electricity cuts.
Electricity generation remains at a fraction of the amount needed by a country of 140 million people.
The effect on Nigeria, a regional superpower, has been economically devastating both for businesses and individuals, says the BBC's Alex Last in Lagos.
Nigerian power supplies are a fraction of what the country needs
Mr Yar'Adua has promised to declare "a national emergency" on power, but our correspondent says not much has happened yet.
The committee said the 34 non-existent companies included some with names such as "Special Projects", "Space Master" and "Sassy Fund".
Previous energy ministers were among those who appeared before the panel, including former Power and Steel Minister Liyel Imoke.
He said no money had been misappropriated.
"The impression is that it has been channelled into private pockets," he said.
"This is not correct".
Olusegun Agagu, another former power minister, conceded at a panel hearing that the performance of the power sector left much to be desired.
"To, however, generalise that nothing has been done in the last eight to nine years to improve the sector is also far from the truth," he said.