The reduction of electricity tariff for Band A customers in Enugu state has sparked a wave of concerns within the Power Generation sub-sector of the power industry.
The Enugu Electricity Regulatory Commission’s (EERC) which just announced slash of electricity tariffs for Band A customers from N209/kWh to N160/kWh, effective August 1, 2025, has received backlash from the Association of Power Generation Companies (APGC) with reaction that warned of possible negative fallout and repercussions.
The Association said the action of EERC has broader implications for the sector that is currently under pressure.
According to the chief executive officer of APGC, Joy Ogaji, the decision would possibly set a precedent that could further undermine the long-term viability of the Nigerian Electricity Supply Industry (NESI).
Ogaji, noted in a note made public that the action poses serious risks of systemic failure if critical financial and structural issues remain unaddressed.
She dismissed insinuation that the federal government (FGN) is subsidising the electricity sector, arguing that what is currently unfolding is not subsidy support but an unsustainable accumulation of debt. “There is no FGN policy on electricity subsidies. What we are witnessing is unchecked debt accumulation,” she said.
She noted that the monthly invoice for electricity generation averages around N250 billion, but only N900 billion was allocated for the entire 2025 fiscal year—an amount that, as of July 21, 2025, remains unfunded.
Based on EERC’s tariff order, the generation cost per kilowatt-hour is pegged at N112, but only N45 is reflected in the tariff, leaving a 60 per cent shortfall presumably to be covered by FGN—despite no clear financing plan or cash backing.
In her analysis, Ogaji, said the tariff issued by EERC has set a precedent for all other states, stressing that there are many, and burning questions about dealing with obligations and liabilities including all legacy debts post privatisation but before the exit to state independence in the decentralisation discourse.
She recalled that GenCos are currently owed about N4 trillion (N2 trillion for 2024 and N1.9 trillion in legacy debts) (2015-2024) with an accumulated debt of N1.2 trillion for first half of 2025 alone and there are no workable solutions, including cash payments, financial instruments, and debt swaps in sight at the moment.
She also informed that the 2025 government budget allocates only N900 billion, raising concerns about its adequacy to cover arrears and future deficits.The power generated by GenCos have continued to be consumed in full without corresponding full payment.
“At the inception of the privatisation, as part of the takeover process and in line with the Government’s objectives, the GenCos entered into several agreements, including the Performance agreement, which defined the contractual relationship between FGN and GenCos”, she noted.
In an attempt to exonerate the GenCos from being seen as inefficient, she said about 12 years after the privatisation, data shows that GenCos available generation capacity requirements has been exceeded, indicating that the GenCos have kept to their industry agreement with the Bureau of Public Enterprise (BPE) and the NESI as a marketHowever, she pointed out that despite the growth of power both available capacity and declared capacity, power still remains a national problem, as over 50 per cent of this capacity is not being enjoyed by consumers due to constraints at the transmission and distribution subsector, hampering GenCos operations.
Ogaji, said further, “At the inception of the Transitional Electricity Market (TEM) in 2015, commitments were made to “guarantee” GenCos full payment of their invoices, underpinned by security deposits which the Distribution Companies (“DisCos”) were meant to provide, to cover monthly shortfall in payments. GenCos relied on this supposed guarantee and payment assurance to increase their investment in additional capacity.
“Sadly, as at today, the payment assurances and supposed guarantees (whether from Nigerian Bulk Electricity Plc [NBET] or the Electricity Distribution Companies [DisCos] are not in place with resultant dire consequences for GenCos, the entire power sector and the Nigerian economy.
“GenCos, as good corporate citizens with patriotic zeal, have made large-scale investments in the power sector with associated business risks while fulfilling their obligations as stipulated in the terms and conditions and guidelines contained in the various industry agreements and have continued to add capacity, despite the difficulties being faced by them on their part.”
For the clarity of purpose and the avoidance of any doubt, she revealed that the critically disruptive obligations of the industry to GenCos include outstanding indebtedness on already invoiced Energy and Capacity delivered/availed, Non-payment of interest on unpaid invoiced amounts.
She also stated that GenCos currently bear all the sector risks, including, unutilised capacity, Non-adherence to the contract and conditions of services, grid instability and high-frequency challenges, risks of Lenders and banks pressure, including host community restiveness and apathy.
Also, due to an aged and weak Transmission and Distribution System, generated power is rejected or forced to be reduced to match the Infrastructure that distributes this Power to the Customer, making GenCos operate below their optimum.
In addition she said the GenCos face difficulty in servicing their debt and equity in procuring these assets and operations and maintenance are heavily affected, while new investments and expansions are hampered.
Ogaji, argued that electricity plays a critical role in economic growth, security, and provides stability in human existence, development, as well as poverty eradication and that the Nigerian Electricity Market (NEM) has the potential to absorb significant investments and provide rewarding returns on those investments if the market is allowed to run on a competitive basis with little or no government interference.
“Research has shown that for every one per cent increase in electricity supply, an economy is expected to grow or decrease by 3.94 per cent, vis-à-vis GDP.
“NESI will attract more investors and Nigerian-made products, leading to less
reliance on imported products, bringing about competition and cost effectiveness with little or no government interference.
The Nigerian electricity sector is at a tipping point that presents significant opportunities and challenges for investors, entrepreneurs, and policymakers.
“By implementing reforms that improve power’ operational and financial performance, NESI can in turn become financially sound and can attract private investment,” she said.
Ogaji, further explained that maintaining the bankability of the sector is important to ensure continued investments to maintain existing
capacity, expand or introduce renewable energy technologies, and investments in new power projects and to achieve the anticipated economic growth, Nigeria needs to unlock its potential by taking specific steps to build
capabilities and enable growth across multiple sectors via enabling policy structure, sound contractual framework underpinned by favourable legislative and legally established competitive yet regulated market environment.
She therefore warned that without a sustainable payment mechanism that deals with this contagion permanently, GenCos’ challenges of funding and bankability of major maintenance and future projects will continue.
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