The Nigerian Electricity Regulatory Commission (NERC) has cautioned state governments against independently reducing electricity tariffs for power supplied from the national grid, warning that such moves could undermine the stability and liquidity of Nigeria’s electricity market.
The warning follows a recent decision by the Enugu Electricity Regulatory Commission (EERC) to slash tariffs for Band A customers in the state from N209/kWh to N160/kWh a move that has sparked nationwide debate and pushback from electricity distribution and generation companies.
In an advertorial published on Thursday and seen by THISDAY, NERC emphasized that while the 2023 Electricity Act empowers states to regulate electricity within their jurisdictions, that authority does not extend to power generated and transmitted via the national grid, which remains under federal oversight.
“States do not have jurisdiction over the national grid or power stations established under federal laws or operating under licences issued by the Commission,” NERC stated.
“They must holistically incorporate the wholesale costs of grid supply to their states without deviation in their end user tariffs unless they are prepared to fund such deviations through subsidies.”
NERC disclosed that the tariff reduction by EERC assumed a federal subsidy of N66.85/kWh, reducing the generation component from N112.60/kWh to N45.75/kWh an unsanctioned cost assumption that could trigger financial imbalances in the Nigerian Electricity Supply Industry (NESI).
The Commission maintained that it is currently engaging with the Enugu regulatory body to address areas of “misinterpretation or misunderstanding” regarding wholesale generation and transmission costs.
Electricity distribution companies (Discos), through their umbrella body the Association of Nigerian Electricity Distributors (ANED) have criticized the tariff cut, warning that it sets a dangerous precedent and could destabilize the entire sector.
In a statement signed by ANED’s Chief Executive, Sunday Oduntan, the Discos said they were already facing increased pressure from customers in other states demanding similar tariff reductions, which could lead to widespread payment defaults.
“We note that one of the principles adopted by EERC is to rely on the federal government’s subsidy policy. While Discos are not opposed to subsidies, they must be transparently structured and promptly funded,” the statement read.
The Discos stressed that delayed or unfunded subsidies have already plunged the sector into a liquidity crisis, with generation companies (Gencos) and gas suppliers owed nearly N5 trillion.
“Any uncoordinated tariff action will result in revenue shortfalls for Discos, weakening remittances to Gencos and putting upstream service providers at further financial risk,” they added.
They also questioned the capacity of most state governments to fund electricity subsidies amid fiscal constraints.
“Most states cannot afford direct subsidy payments given rising governance costs and economic realities,” the Discos said.
To prevent market disruption, the Discos called for tighter coordination between NERC, the Federal Ministry of Power, and state regulators on tariff policy and urged the development of a transparent, fully funded subsidy framework.
“While we all share the goal of affordable electricity, this must be pursued without compromising market sustainability, investor confidence, or service delivery,” ANED said.
Amid the ongoing row, ANED has warned that Band A electricity customers in Enugu could face power cuts if they continue to pay the reduced N160/kWh tariff announced by EERC.
Speaking during a television interview on Thursday, ANED’s Executive Director of Research and Advocacy, Sunday Oduntan, described the tariff cut as “deceptive” and warned that it could lead to supply disruptions.
“If you are in Band A and in Enugu, and they are now asking you to pay N160 per kilowatt-hour, they are deceiving you,” Oduntan cautioned.
“At the end of the day, your light will begin to go off. We are talking about cost recovery. We are talking about not setting us back to those dark old days.”
The warning came after EERC slashed the tariff charged by MainPower a subsidiary of Enugu Electricity Distribution Company (EEDC) raising concerns that the lower price could impair the company’s ability to purchase power and maintain service levels.
While the move has been welcomed by some residents, industry stakeholders argue that electricity pricing must be tied to actual generation and transmission costs to ensure long-term sector viability.
NERC, ANED, and other players are now calling for a unified, coordinated approach to electricity tariff setting that reflects market realities while accommodating social interventions like subsidies in a sustainable, accountable manner.
