Photo File: Electricity Grid

Electricity generation and distribution companies have expressed outrage as several states begin slashing electricity tariffs following the decentralisation of the power sector enabled by the Electricity Act 2023. The move, led by Enugu State, has triggered a wave of planned tariff reductions across other sub-national regulatory authorities, prompting warnings from stakeholders about the sustainability and financial implications for the sector.

On Sunday, the Enugu Electricity Regulatory Commission (EERC) issued a new tariff order to MainPower Electricity Distribution Limited, slashing the Band A tariff from N209 per kilowatt-hour to N160/kWh, effective August 1, 2025. The decision was followed by similar announcements from Ondo and Plateau states, with Lagos, Oyo, and others set to unveil their own plans in the coming weeks.

But power generation companies (Gencos) and distribution companies (Discos) have strongly opposed the move, warning that it undermines cost-reflective pricing and jeopardizes the fragile financial health of the Nigerian electricity sector, which is already owed over N5 trillion in accumulated debts.

“This tariff issued by EERC has set a precedent for all other states. It fails to reflect the true cost of electricity generation,” said Dr. Joy Ogaji, CEO of the Association of Power Generation Companies, in a statement on Monday.

She argued that the tariff relies on assumptions of government subsidies that are neither backed by current federal policy nor supported by sufficient budgetary allocations.

“There is no official Federal Government policy on electricity subsidies—only debt accumulation. The Enugu State order captures only N45 out of N112 required for generation costs, assuming that the shortfall will be covered by the FG. That’s an unsustainable and dangerous precedent,” Ogaji added.

The Enugu State Government, however, defended the move. Chairman of the EERC, Chijioke Okonkwo, said the commission’s new rate was the result of a six-month review process grounded in its 2024 Tariff Methodology Regulation. According to him, the N160/kWh tariff was made possible by factoring in federal subsidies on power generation.

“We developed a state-specific, data-driven model to compute tariffs based on operating costs, inflation, capital expenditure, and estimated losses. With the current federal subsidy on generation, we were able to set a fairer price for our Band A consumers,” Okonkwo said during a live interview on TV.

He explained that the average cost of power supply under the subsidy regime stands at about N94/kWh in Enugu, but warned that the figure could rise to N112/kWh if the Federal Government withdraws its subsidy support.

In contrast, Ekiti State has chosen to maintain the existing national tariff structure for now. Prof. Bolaji Aluko, Commissioner for Infrastructures and Public Utilities, said the state would remain under the Nigerian Electricity Regulatory Commission’s (NERC) Multi-Year Tariff Order (MYTO) until all states exit the federal model.

“We are watching closely. While a reduction is good in principle, we must also ensure it is sustainable and doesn’t compromise service delivery,” he said.

Other states, including Ondo, Plateau, and Lagos, are aligning with Enugu’s direction. Lagos State Commissioner for Energy and Mineral Resources, Biodun Ogunleye, confirmed that the state is reviewing Enugu’s model and will announce its own tariff plan soon.

“We’re studying what Enugu has done. Lagos accounts for nearly 50% of national consumption, so we must be strategic. We had plans before, but we’ll make some pronouncements soon,” Ogunleye said.

Similarly, Ondo State Commissioner for Energy and Mineral Resources, Johnson Alabi, said the state had already begun internal steps to determine its own tariffs.

“We are already negotiating power purchase agreements. We buy our energy directly from the Transmission Company of Nigeria, and we will determine our tariff ourselves,” he stated.

But Discos operating in the affected states are pushing back, arguing that the new state-imposed tariffs are unrealistic and threaten investor confidence.

“No investor will support a market where cost recovery is not guaranteed. If a state cuts tariffs below production cost, it must be ready to bear the subsidy burden,” said a senior Disco official who spoke on condition of anonymity.

He stressed that tariffs should reflect market realities and cautioned that any legal conflict between state and federal electricity laws could result in reversal of state policies.

“Band A is no longer subsidised by the Federal Government. If Enugu or any other state chooses to subsidise, they must pay the shortfall without delay,” he added.

The Nigerian Electricity Regulatory Commission recently confirmed that seven states—Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi—have taken full control of their electricity markets under the 2023 Electricity Act. Lagos, Ogun, Niger, and Plateau are expected to complete their transition by September.

Industry experts are divided on the implications of the emerging regulatory autonomy.

Tayo Adegbenle, founder of PowerUp Nigeria, expressed concerns over EERC’s assumption of ongoing federal subsidies.

“The EERC’s model assumes the FG will continue to subsidise, which is a stretch. Enugu must also factor in legacy liabilities to claim true autonomy,” he said.

Another analyst, Bode Fadipe, said the long-term effect of the state-level interventions is yet to be seen.

“It’s still early, but the Enugu regulator may have achieved its short-term objective. Whether it’s sustainable is another matter,” he added.