Confusion over New Power Act deepens sector crisis

…major stakeholders fight on subsidy

The move by some state governments to assume responsibilities for regulating electricity markets within their various domains in accordance with the amended Electricity Act 2024 has sparked a major crisis in the power industry, Business Hallmark can report.

The decision of the Enugu Electricity Regulatory Commission (EERC) and other  states regulatory commissions to fix energy prices within their domains has brought them on collision course with aggrieved industry operators, who are opposed to the scrapping of existing energy tariff order.

While states electricity commissions maintain that they have the necessary legal backing to regulate the electricity market in their states, including the authority to fix energy prices sold to residents by discos, the operators, supported by the industry’s regulator, the National Electricity Regulatory Commission (NERC), argued that they lack the power to do so.

The brewing feud, energy experts warn, will undo government’s efforts to revive the struggling power sector if not checked

It would be recalled that President Bola Tinubu had in February 2024 signed the Electricity Act (Amendment) Bill  2024 into law.

Solution As Problem

Earlier passed by the House of Representatives on July 27, 2023, and the Senate on November 14, 2023, the landmark act decentralized the nation’s power sector, with states now having the power to oversee electricity generation, transmission and distribution within their jurisdictions.

And from June 2024, the Nigerian Electricity Regulatory Commission (NERC) started granting states the power to control their electricity markets  in accordance with the Electricity Act.

So far, seven states regulatory commissions have successfully received licences from NERC to oversee the electricity sector in their domains. They include Enugu, Ondo, Ekiti, Imo, Oyo, Edo, Kogi, Lagos, Ogun, Niger and Plateau.

Other states are still trying to meet NERC’s requirements to enable them complete the transition.

Apparently buoyed by its  newfound powers, the Enugu State Electricity Regulatory Commission on Saturday, July 19, 2025, issued a new tariff to MainPower Electricity Distribution Limited, the electricity company that succeeded Enugu Electricity Distribution Company (EEDC) in the state.

The order, with number EERC/2025/003 and tittled: “Tariff Order for MainPower Electricity Distribution Limited 2025, compelled MainPower to slash the electricity tariff in the coal city state.

Specifically, EERC reviewed downward electricity cost for Band A from N209/ kWh (per kiloWatt) to N160/kWh. However, the new tariff will take effect from 1 August.

Defending its action, EERC said it acted in compliance with the Enugu State Electricity Law 2023, which empowers it to regulate the activities of electricity companies in the state.

Holding To Subsidy

According to the body, tariffs must reflect power generation subsidies by the Federal Government for the benefit of electricity consumers, maintaining:

“We reviewed their entire costs, using our Tariff Methodology Regulations 2024, and the supporting Distribution Tariff Model to get an average price of N94.

“The price is low due to some reasons and including the fact the federal government is subsidizing electricity generation cost, which comes to a cost of about N45 out of the actual cost of N112 for Enugu State.

“That was how we came about the average tariff of N94 as cost reflective tariff at our level as a subnational electricity market”, said Engr. Chijioke Okonkwo,  chairperson of EERC.

As expected, other state governments have signified their intention to follow Enugu example, calling it a well intentioned move.

Speaking on behalf of the 36 states commissioners for Energy under the aegis of the  Forum of Commissioners of Power and Energy in Nigeria (FOCPEN), the Chairman of FOCPEN and Commissioner for Power and Renewable Energy, Cross River State, Prince Eka Williams and the Secretary of the forum, Benue State Commissioner for Power, Renewable Energy and Transport, Barrister Omale Omale, said the forum is in total support of EERC’s decision.

“It is crucial to understand that Enugu State’s actions are fully aligned with the provisions of the Constitution of the Federal Republic of Nigeria, the Electricity Act 2023, and Enugu State electricity laws and regulations.

“These legal frameworks empower states to regulate their intra-state electricity markets, including determining and implementing electricity tariffs within their jurisdiction, which are fair to electricity consumers and sufficient to allow licensees to recover their operating expenses and investments.

“FOCPEN wishes to also clarify that the EERC’s tariff order followed a comprehensive and meticulous review process that involved a thorough examination of the capital expenditure (Capex) and operational expenditure (OpEx) assumptions of MainPower Electricity Distribution Company, the state electricity distribution company.

“This rigorous assessment was conducted using data and information provided by the distribution company itself. EERC also carried out a rigorous assessment of MainPower’s existing customer tariff classification and regulatory asset base”, the forum noted.

Expecting Lower Tariffs

BH reliably gathered at the weekend that many electricity consumers across the country with prepaid metres, in anticipation of an imminent crash in electricity tariffs, have started cutting back on energy purchases. While those on estimated billing are refusing to pay the current bills issued by their electricity distribution companies (discos).

“I heard that the costs of energy will come down on August 1. On Wednesday, I decided to buy only N5,000 worth of energy, instead of the N10,000 I used to spend on buying energy.

“There’s no way I will finish this over 100 units before the commencement of the new price regime in August”, said Rafiu Adepoju, a cobbler residing in the Agege area of Lagos.

When reminded by our correspondent that the new tariff order applies only to  Enugu electricity consumers, Adepoju insisted that he heard it from a reliable source that his service provider, Ikeja Electric (lE), will soon begin the implementation of the tariff after getting a memo to that effect from the Lagos State Electricity Regulatory Commission (LERC).

However, BH checks revealed Rafiu Adepoju’s assertions to be far-fetched.

Meanwhile, electricity operators and the regulator of the electricity industry have kicked against the move by states to effect a new tariff order different from the one put in place by NERC, calling it ill-advised.

They maintained that the move will bring the sector to its knees if states refused to call it off.

Operators Protest

Speaking on the matter, electricity distribution companies (discos) under their umbrella body, Association of Nigerian Electricity Distributors (ANED), lamented that Enugu’s action has affected other discos outside the state battling mounting pressure to reduce tariffs.

According to ANED’s Chief Executive Officer, Sunday Oduntan, electricity consumers are already threatening to stop paying bills.

He also said that discos operating in other parts of the country have come under intense pressure to follow suit since the EERC’s tariff order was issued.

“Since the release of the tariff order by EERC for Enugu State residents, electricity distribution companies in other states have come under intense pressure and scrutiny also to reduce tariffs, while some customers have taken a position that they will no longer pay their electricity bills until tariffs are reduced”, Oduntan said.

He added that the EERC unilaterally made the decision to slash tariff without adequate coordination with NERC and other key market players.

“We duly recognize changes in law and regulation that now permits states to set up their electricity markets.

“However, any state-level policy action such as uncoordinated tariff reductions that does not align with market-wide cost-recovery mechanisms will inevitably result in shortfalls in discos remittances to the market below their current Distribution Remittance Obligations, thereby putting GenCos and other upstream service providers at further financial risks”.

The ANED boss maintained that  the tariff reduction by EERC raises significant concerns for the stability and liquidity of the Nigerian Electricity Supply Industry (NESI).

“It is not our intention to make life difficult for our loyal customers, and we have been aligning with the federal government to ensure provision of stable power supply.

“However, the cost reflective tariff is as a result of the economic realities of our nation. Any subsidy regime must be transparently structured and fully funded to prevent further disruption in market operations”, ANED noted.

In the same vein, electricity generation companies kicked against states to review the existing energy tariff order.

The Chief Executive Officer of the Association of Power Generation Companies, Joy Ogaji, argued that the recent reduction in tariff is based on flawed assumptions, which could jeopardize the already fragile national power sector.

Ogaji warned that the tariff revision sets a precedent for all other states and fails to reflect the true cost of electricity generation.

“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 subsidizing 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?” Ogaji queried.

The industry’s national regulator, NERC, is also insisting that state governments lack jurisdiction over national grid and  electric power stations established under federal laws or operating under licences it issued.

The commission warned state governments to reflect the wholesale costs in tariffs or be ready to pay subsidies for any tariff shortfall.

“As states do not have jurisdiction over the national grid and over electric power stations established under federal laws/operating under licences issued by the commission; they must holistically incorporate the wholesale costs of grid supply to their states without any qualification or deviation in their design of tariffs for end-use customers in order not to distort the dynamics of the market or be prepared to make a policy intervention by way a subsidy for any deviation in the tariff structure that distorts the wholesale generation, transmission and legacy financing costs in the Nigeria Electricity Supply Industry”.

Caught In-between Odds

NERC warned that it would not allow institutions to take decisions that expose the national grid and wholesale electricity market to a financial crisis in contravention of express powers granted to them by the constitution.

“The commission’s attention has been drawn to the increasing stakeholders’ concerns on the Tariff Order (Order No. EERC/2025/003) issued by the Enugu State Electricity Regulatory Commission, to its Licensee Mainpower Electricity Distribution Limited that relies exclusively on electricity supply (generation and transmission) from the national grid.

“NESI stakeholders have expressed concern about the consequences of the reduction of tariffs for Band A customers in MEDL’s network area to N160.4 per kWh and the freezing of tariffs of customers in the other bands on the wholesale generation and transmission costs, along with the financing costs for legacy obligations in NESI.

“It is pertinent to state that the N160.4 per kWh was arrived at largely by reducing the current average Generation Tariff of N112.60 per kWh to N45.75, with an assumption of a subsidy component, a difference of N66.85 per kWh.

“Section 34(1) of the EA places a statutory obligation on the commission to create, promote and preserve efficient electricity industry and market structures, and ensure the optimal utilisation of resources for the provision of electricity.

“We are also aware that EERC as a sub-national electricity regulator also has a similar statutory obligation in their enabling law; and neither NERC nor EERC as responsible regulatory institutions would take decisions that expose the national grid and wholesale electricity market to a financial crisis in contravention of express powers granted to them by the constitution”, NERC noted.

Reacting, a Professor of Energy at the University of Lagos, Dayo Ayoade, cautioned against conflicts.

While urging the Federal Government and states to put mechanisms in place to foster the growth of the sector during the transition, Ayoade advised state regulators to be investor-friendly instead of putting up regulations that could scare investors away.