Electricity Act Fallout Rocks Sector—Operators Warn of Chaos Over Tariff Cuts

More states are moving to slash electricity tariffs after the Enugu Electricity Regulatory Commission (EERC) announced a new tariff order reducing Band A charges for MainPower Electricity Distribution Limited customers from ₦209 per kilowatt-hour to ₦160/kWh, effective August 1, 2025.....KINDLY READ THE FULL STORY HERE▶

The decision has sparked outrage among power generation and distribution companies, who warned that such moves could cripple the already fragile power sector. According to the Association of Power Generation Companies (GenCos), the industry is currently owed more than ₦5 trillion in unpaid invoices.

Despite the backlash, the Enugu government insisted on its decision, stressing that it followed due process before approving the new Band A tariff. The EERC argued that the revised tariff reflects the Federal Government’s subsidies aimed at cushioning electricity costs for consumers.

GenCos and Discos, however, pushed back. In a statement issued Monday, Joy Ogaji, Chief Executive Officer of the Association of Power Generation Companies, warned that Enugu’s tariff order sets a dangerous precedent for other states and does not reflect the true cost of electricity generation.

States Join Enugu’s Tariff-Cut Drive
On the same day, other states with independent electricity regulatory powers signaled plans to follow Enugu’s lead. The Nigerian Electricity Regulatory Commission (NERC) recently disclosed that seven states—Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi—now control their electricity markets under the Electricity Act 2023, with Lagos, Ogun, Niger, and Plateau expected to complete transitions by September.

Officials from Ondo and Plateau confirmed they are considering tariff cuts, while Lagos said it will soon unveil its own tariff plan. Ekiti, however, noted that it would continue with the NERC-approved Multi-Year Tariff Order for now.

Discos Demand States Cover Shortfalls
Distribution companies operating in these states warned that any government implementing tariff reductions must cover the resulting revenue shortfalls immediately, rather than shifting the burden to the Federal Government—which itself still owes over ₦4 trillion to GenCos.

EERC’s Order No. EERC/2025/003 reduced tariffs only for Band A customers while leaving Bands B, C, D, and E unchanged. EERC Chairman Chijioke Okonkwo explained that the review of MainPower’s licence and tariffs justified the reduction, which he described as cost-reflective.

GenCos: Tariff Cuts Based on False Assumptions
GenCos disagreed, arguing that Enugu’s assumptions on subsidies are flawed and dangerous. Ogaji stressed that there is no Federal Government-backed subsidy to cover the ₦45 per kWh cost gap the EERC order relies on, adding:

“This tariff issued by EERC has set a precedent for all other states. From their tariff order, only ₦45 is captured for the generation cost out of ₦112. This raises critical questions about how legacy debts and liabilities will be handled under power sector decentralisation.”

Ogaji further queried whether EERC expects the Federal Government to continue subsidising its electricity market or intends to design tariffs that attract investors without federal backing.

She also highlighted that GenCos are owed over ₦4 trillion, while the Federal Government’s 2025 budget allocates only ₦900 billion for electricity support—an amount she described as grossly inadequate to cover arrears and ongoing deficits.

“The power generated by GenCos is being fully consumed,” she said, “but payments remain incomplete, and there are no workable solutions—such as cash settlements, financial instruments, or debt swaps—in sight.”