More states have announced plans to reduce electricity tariffs in their jurisdictions after the Enugu Electricity Regulatory Commission issued a new tariff order to MainPower Electricity Distribution Limited, revising the electricity cost for Band A customers from N209 per kilowatt-hour to N160/kWh, effective August 1, 2025.
This was, however, vehemently opposed by power generation and distribution companies, who claimed that the move may cripple the sector, as the Gencos declared that the industry is indebted to power producers to the tune of over N5tn.
As the Gencos and Discos attacked Enugu State over its move on Monday, the state insisted on its decision, stressing that it followed all required processes to arrive at the new N160/kWh power tariff for Band A consumers.
The power firms kicked against the Enugu Electricity Regulatory Commission’s planned cut of Band A electricity tariffs, warning that the decision relies on questionable subsidy assumptions and poses serious risks to the country’s fragile power sector.
So This Happened (EP 258) Reviews NNPC’s Plans To Secure A $2 Billion Oil-backed Loan, Others
In a statement issued on Monday by the Chief Executive Officer of the Association of Power Generation Companies, Joy Ogaji, the Gencos stated that the tariff revision sets a precedent for all other states and fails to reflect the true cost of electricity generation.
However, still on Monday, more states with independent electricity regulatory powers indicated their interest in slashing tariffs like their Enugu counterpart.
Recently, the Nigerian Electricity Regulatory Commission disclosed that seven states now control their electricity markets in accordance with the Electricity Act 2023. The states are Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi. Other states, including Lagos, Ogun, Niger, and Plateau, are expected to complete their transitions between now and September.
Speaking with The PUNCH on why they plan to cut tariffs in their jurisdictions, the states said the motive was to make life better for the masses.
Ondo and Plateau states declared that they have plans to slash tariffs. Lagos said it would soon announce its tariff plans for Lagosians. However, Ekiti insisted on working with the current Multi-Year-Tariff Order of the Nigerian Electricity Regulatory Commission for the time being.
However, the Discos, who operate in these states, warned that any state planning to cut tariffs should be ready to pay the shortfall without any delay, saying they should not put such burdens on the Federal Government, which has yet to pay the N4tn owed to the Gencos.
EERC had announced on Sunday that it had reduced the Band A tariff in the state from N209/kWh to N160/kWh, effective August 1, 2025, while keeping tariffs for Bands B, C, D, and E frozen. The commission issued a new tariff order to MainPower Electricity Distribution Limited, reducing the electricity cost for Band A customers.
According to the commission’s Order No. EERC/2025/003, the move was deemed cost-reflective, insisting that the tariff must reflect the power generation subsidy by the Federal Government for the benefit of electricity consumers.
EERC Chairman, Chijioke Okonkwo, explained that the reduction in tariff became imperative following the commission’s review of MainPower’s tariff and licence applications as the new subsidiary of the Enugu Electricity Distribution Company operating in Enugu State.
But power generation companies disagreed, saying that the assumption by Enugu State was deeply flawed and dangerous. According to the Gencos spokesperson, Ogaji, the EERC tariff order made it imperative to provide some clarification on the news that the Federal Government had provided a subsidy for electricity.
She stated that there is no government policy on subsidies but debt accumulation, wondering why the Enugu state government is placing more burden on the GenCos, who bear the brunt of unpaid subsidies.
“It is imperative to state that there is no FGN policy on subsidies. It is a debt accumulation,” she stated. Ogaji warned that the N45 per kWh being covered leaves a 60 per cent cost gap that EERC assumed would be filled by the Federal Government, despite no official or cash-backed subsidies in place.
“This tariff issued by EERC has set a precedent for all other States. From their tariff order, only N45 is captured for the generation cost out of N112. This portends a bigger issue in the decentralisation of power or electricity to the states. There are many burning questions about dealing with obligations and liabilities (all legacy debts post privatisation but before the exit to state independence) in the decentralisation discourse.
“Does this position mean EERC is looking over to the FG to continue subsidising its electricity? How does EERC account for their share of the accumulated sector debt, or are they assuming assets with no liability? Should EERC not be designing its tariff to remove its dependency on the FG and make its market attractive for investors?” she queried.
Ogaji recalled that Nigerian power generators are collectively owed over N4tn. She noted that the Federal Government’s 2025 budget only earmarked N900bn for electricity support, a figure she described as inadequate and unable to cover even half of the sector’s annual generation invoices, which average N250bn monthly.
She regretted that “there are no workable solutions, including cash payments, financial instruments, and debt swaps in sight” at the moment. The 2025 government budget allocates only N900bn, raising concerns about its adequacy to cover arrears and future deficits. The power generated by GenCos has continued to be consumed in full without corresponding full payment.”
States react
The Plateau State Electricity Commission said it is working towards reducing electricity tariffs for residents. The Chairman of the commission, Bagudu Hirse, disclosed this to The PUNCH on Monday.
“We are working towards making life better for the citizens of Plateau State, and we will bring down the electricity tariff for our people. Take it from me, as soon as we resume, that will be our focus,” Hirse stated.
The decision, he said, follows the inauguration of the Plateau State Electricity Commission by Governor Caleb Mutfwang on July 15, 2025, and the transfer of regulatory authority to the state by NERC.
“I hope by next week, we will kick off in that regard to achieve the vision of this administration on power sector reforms,” he added.
On its part, the Lagos State Government said it is studying the steps taken by the Enugu State Government. Lagos State Commissioner for Energy and Mineral Resources, Biodun Ogunleye, in an interview with one of our correspondents on Monday, said Lagos would announce its electricity tariff plan soon.
“We are studying what they have released. We are looking at the number, and we are going to make some pronouncements shortly. What the man has simply done is to remove the amount of subsidy that the government decided to pay the power generators.
“Why should they be enjoying subsidies and, at the same time, we are still paying them? That’s what the man did. So, we are studying the numbers. We had some plans before, he has moved ahead of us, but because of the security and strategic nature of Lagos, we have to be careful in whatever we do,” Ogunleye stated.
He added, “Enugu is not up to one per cent of the national consumption. Lagos is 50 per cent and efforts to negotiate things are increasingly difficult, but we will see how it goes; by this time on Monday, Lagos will have come out with its own set of what we have.”
Also, the Ondo State Government said it would soon reduce the electricity tariffs like Enugu State. The state Commissioner for Energy and Mineral Resources, Johnson Alabi, stated this while speaking with one of our correspondents yesterday.
He said, “We are the first in all ramifications to carry out this kind of thing; others are only learning from us. What is happening in Enugu is already happening here. The only thing is that we have not spoken to the media about what we are doing. All those states are on the verge of signing a power purchase agreement.
“Once we sign our power purchase agreement, we will determine what the tariff will be. We will determine it by ourselves. We are already determining tariffs for some would-be investors who are here because we are buying our energy ourselves, which is strange for any state so far. It is only in those states that have initiated electricity market operation whereby we purchase our power directly from the Transmission Company of Nigeria.”
On power generation, the commissioner said the state is still looking at the dynamics of the power system but would soon achieve it.
Meanwhile, Ekiti State Commissioner for Infrastructures and Public Utilities, Prof Bolaji Aluko, said the state would stay with the tariff structure of the National Electricity Regulatory Commission for now.
Aluko, who said that the announcement of the reduction of electricity tariff for customers on Band A from N209/kWh to N160/kWh by Enugu Electricity Regulatory Commission was still a proposal, said, “We are watching, we will look closely at it.”
While saying it was a good thing to reduce tariff, Aluko said consideration should be given to the aspect of whether or not it would lead to sustainable electricity provision, adding, “The ultimate task for all the new regulatory bodies is to be able set tariffs for all the energy service providers working within their borders, but we are still in a transition period.”
However, he stated, “In Ekiti State, we have tariff models, but our Order 3 says Ekiti will remain on the NERC Multi-Year Tariff Order until every state is out of the MYTO, so that we will continue to enjoy the subsidy of the country. When you set your MYTO, then you must be prepared to provide the subsidy.”
Discos kick
An official of the electricity distribution companies also disagreed with Enugu and other states planning a tariff cut, saying it was not realistic. The official, who did not want his name in print because of the sensitivity of the matter, said what the EERC did was above the bar, wondering how the state regulator would pay for it.
According to him, the declaration of a tariff cut would disincentivise investors due to a lack of cost recovery. “What the EERC did is over the bar. What they did was above their power, and there’s no way they won’t pay for it.
“Electricity is paid for everywhere in the world. We always talk of cost recovery. No businessman will put his money into any business if he cannot recover his costs. Enugu just shot itself in the foot because the cost of producing 1kwh of electricity is more than N200. They fixed the tariff at N160/kWh. Who will pay for the shortfall? Can the state pay the subsidy?” he asked.
The Disco official stated that when a subnational law is against the Nigerian constitution, it would be declared null and void, saying the order would work if the state is ready to bear the shortfall.
“It is a well-known fact that any regional law that is at variance with the Nigerian constitution will be declared null and void. States cannot do something that is not feasible. With this, there would be a huge shortfall, and states must be ready to pay it,” he stated.
The stakeholder stressed that a subsidy is good if it is targeted at the poor, and the government should pay the shortfall without delay. “Nobody is against subsidy, but it should be targeted at the poor, the sick, the unemployed, and the aged. Don’t give subsidies to those who can afford payments.
“The Federal Government has said tariffs should be capped below the cost of production, but it is not paying the shortfall to the Gencos. Enugu feels it wants to make the people happy and challenge other states. But it has done something wrong by not considering the realistic market prices,” he said.
He added that states cannot put the burden of Band A on the Federal Government because it had already removed subsidies in that Band. “States should know that they can’t put Band A tariff shortfalls on the Federal Government. That is no longer possible because Band A is no longer subsidised,” he submitted.
Enugu defends tariff cut
Responding, the Chairman of the Enugu State Electricity Regulatory Commission, Okonkwo, defended the state’s decision to slash the Band A electricity tariff from N209/kWh to N160/kWh, describing it as a data-driven intervention based on cost-reflective pricing and federal government subsidy.
During an interview with AIT on Monday, Okonkwo clarified that the revised Band A tariff was arrived at through a rigorous regulatory process that began over six months ago, shortly after the commission assumed full regulatory oversight of the electricity market in the state.
“We have put out regulations that would guide the development of our own state-specific electricity market. One of our regulations happens to be the Tariff Methodology Regulation of 2024.
“This work on tariff review started over six months ago when we assumed full regulatory oversight over our electricity space in Enugu State. And following that, we have since issued a number of regulations to guide the development of our own state-specific electricity market, including the Tariff Methodology Regulation of 2024,” he said.
The chairman explained that the regulation mandates operators to calculate their tariffs using a transparent cost-based model, taking into account inflation, operating costs, planned capital expenditure, and estimated energy losses.
MainPower, he said, submitted a detailed breakdown of its operating data, including customer numbers, losses, asset base, CAPEX projections, and expected service improvement plans. The tariff was then computed based on this information, using the state’s approved methodology.
However, the regulator noted that a key factor in the final pricing was the ongoing subsidy by the Federal Government on electricity generation.
“The regulation specifies that every operator, developer, investor or player in the electricity space has to run their operations, the cost of developing their projects through either the generation model or distribution model. And the methodology that we have put in place as a regulation will guide them on how to input all their costs into our model.
“Now, at the end of it all, after imputing all their costs, be it inflation, be it the cost of purchasing materials, be it the cost of implementing, developing their power plants, irrespective of their capacity, taking into consideration the anticipated losses, the outcome of it is the average tariff that that entity, be it generation or distribution, would charge its off-takers.
“The current tariff we recently approved for MainPower is a tariff that has been heavily subsidised at the generation end by the Federal Government. We took advantage of that subsidy to compute a more affordable tariff for Enugu residents,” he added.
According to him, with the federal subsidy in play, the average cost of electricity delivery across MainPower’s operations stands at just over N94/kWh. He also warned that the current affordability of tariffs may not last if the Federal Government ends its subsidy for electricity generation.
“If the subsidy is removed, the generation cost will jump to an average of N112/kWh. That would significantly increase the final tariff, likely making it higher than the current N160/kWh for Band A,” Okonkwo cautioned.
Experts react
Meanwhile, stakeholders have questioned how the Enugu regulator arrived at a subsidy for Band A customers after the Nigerian Electricity Distribution Company removed the same on April 1, 2024.
Speaking with The PUNCH, the founder of PowerUp Nigeria, Tayo Adegbenle, wondered if the EERC truly understands the action it’s about to take.
“I don’t believe they have the right data and might have missed something in the computation of that tariff. I also believe that their assumption that the FG will continue to subsidise tariff for Enugu State is far-reaching, and it is not right for Enugu State to desire regulatory autonomy without also considering other liabilities that come with it,” Adegbenle said.
He stated that it is still early in the day “but I am expecting the National Regulatory Commission, NISO, and maybe NBET to also come up with their positions.” He noted that the GenCos would panic because Enugu would have to provide the evidence that they would be able to pay for the electricity consumed in the state.
“The nearest situation we have to this is in South Africa, where ESKOM sells to municipalities at the cost price, who then set their local end-user tariffs. I expect the national grid to sell to Enugu State at a cost-reflective rate, and Enugu can therefore do whatever they wish with the electricity,” Adegbenle submitted.
Another stakeholder in the power sector, Bode Fadipe, said that though the issues are still unfolding, the regulator may have achieved what it intends to with the tariff cut.
“The issues are still unfolding. It may be too early in the day to start talking about it. So, it stands to be seen what EERC is seeking to do with the tariff they have approved for the Enugu SubCo,” Fadipe stated.
The Punch
