The federal government has taken a firm position regarding states that opt to reduce electricity tariffs, stating that the responsibility for the corresponding subsidy must be borne by the states themselves.
The Ministry of Power, which made this known, said that while it did not intend to control entities with regulatory autonomy, it expects them to consider market realities before deciding on tariff adjustments.
This is as the Benue State Commissioner of Power and Renewable Energy and Chairman, Forum of Commissioners of Power and Energy in Nigeria, Barr. Omale Omale, has defended the action of the Enugu Electricity Regulatory Commission (EERC) in reducing electricity tariffs for Band A customers in the state.
While the action has raised widespread reaction within the power generation sub-sector of the industry, Omale said the current tariff structure in Enugu State—as calculated by the EERC—is more accurate and admissible.
The Enugu State Electricity Regulatory Commission announced that MainPower Electricity Distribution Limited, the newly licensed distributor in Enugu, would reduce Band A tariffs to N160 per kWh—down from N209—while keeping Bands B to E unchanged.
Following this move, seven states that control their electricity markets via the Electricity Act 2023 are coming under pressure to review tariffs after the EERC rolled out its landmark decision to slash Band A electricity tariffs by nearly 24 per cent, from N209/kWh to N160/kWh, starting from 1 August 2025.
Speaking exclusively with LEADERSHIP, the Special Adviser on Strategic Communications and Media Relations to the Minister of Power, Bolaji Tunji, said that if states choose to reduce tariffs, they must be prepared to finance the subsidy resulting from such reductions, rather than adding to the federal government’s already heavy subsidy burden which currently stands at over N5 trillion in accrued debts related to power sector subsidies.
He emphasised that while states had regulatory autonomy over tariff-setting, this autonomy comes with accountability for the financial implications.
“This is the federal government’s position because the federal government is struggling to honour existing subsidy obligations. States cannot increase the financial pressure on the federal government by unilaterally reducing tariffs without matching subsidy funding,” Tunji stated.
He urged states to assess their fiscal capacity and engage their governors to ensure they can support any subsidy financing arising from tariff reductions.
The stance aligns with broader federal reforms aiming to transition the power sector to a fully cost-reflective tariff regime.
Minister of Power Adelabu and his team have warned that the country’s electricity economy can no longer sustain indefinite subsidies, which have contributed to a mounting debt of over N4 trillion owed to power generation companies (GenCos). The removal of subsidies is tied to efforts to stabilise the sector, improve power infrastructure, and encourage efficient energy consumption, with targeted subsidies retained only for economically vulnerable Nigerians.
FG paid N1.1trn electricity subsidies in Q1
The federal government’s subsidy payments in the first half of 2025 reached N1.1 trillion, highlighting the unsustainable nature of the current regime. States’ decisions to reduce tariffs without fiscal backing would amplify this serious financial strain.
The Ministry of Power is concurrently working on sector reforms that include improving energy generation capacity, expanding renewable energy, and stabilising the power grid.
This shift, enabled by the 2023 Electricity Act and subsequent constitutional reforms, has elicited a fierce response from GenCos and DisCos, exposing an intensifying dispute over consumer relief, subsidy assumptions, and sectoral sustainability.
Enugu govt explains electricity tariff cut
Meanwhile, EERC Chairman Chijioke Okonkwo explained that the new rate was derived using the 2024 Tariff Methodology Regulations and the Distribution Tariff Model, which set cost-reflective pricing at an average of N94/kWh, made possible by presumed federal subsidy on generation of N45 out of N112 costs.
Okonkwo said: “Band A at N160 will help MainPower manage rate shock, and if the subsidy is removed, the savings will assist them in stabilising the tariff over a defined period.”
Moreover, to protect consumers, EERC has mandated daily reporting of feeder performance and introduced automatic downgrades and tariff adjustments if supply standards slip.
Four more states—Lagos, Ogun, Niger, and Plateau—are set to complete their transitions by September.
For instance, in Plateau State, newly empowered after Governor Caleb Mutfwang inaugurated its electricity commission mid-July, the state has confirmed it is working towards lowering tariffs for households.
Lagos State, home to almost 50 per cent of national power consumption, is currently reviewing Enugu’s model carefully before announcing its own tariff plan.
Biodun Ogunleye, the state energy commissioner, noted the complexity of replicating Enugu’s move in the mega-state.
Ondo State hinted at similar plans, revealing that it was preparing its Power Purchase Agreement and setting its own tariff paths.
Meanwhile, Ekiti has opted to stay with the federal Multi-Year Tariff Order (MYTO) until its transition is completed, citing a desire to retain federal backing.
GenCos, DisCos kick over ‘dangerous precedent’
The tariff cut move has triggered strong opposition from both generation and distribution companies. The Association of Power Generation Companies (GenCos), headed by its Chief Executive Officer (CEO) Joy Ogaji, described the cut as dependent on unwarranted subsidy assumptions, potentially setting a dangerous precedent.
Ogaji highlighted that there is no formal federal subsidy policy currently in place.
“It is imperative to state that there is no FGN policy on subsidies. It is a debt accumulation … only N45 per kWh is captured out of N112 actual cost. This portends a bigger issue,” she said.
GenCos reportedly owe entities over N4 trillion in accumulated debts, a situation, they argue, worsened by such regulatory moves.
Band A customers were overcharged – States
Commenting on this, the Chairman, Forum of Commissioners of Power and Energy in Nigeria, Barr. Omale, told LEADERSHIP on telephone that the Commission used accurate information and tools to determine a justifiable tariff structure for consumers in that category.
According to him, from every angle, the Commission used accurate and precise metrics to reach that conclusion and it was realised that the billing of customers under that Band was over and above the actual cost-reflective tariff.
He also declared that other states were taking a cue from Enugu and would adopt the same methodology so that electricity customers are better served and adequately billed.
On whether it will create any market shortfalls, he said based on the numbers as determined by the calculations, there is no subsidy that is either pushed to the federal government or the state.
Also reacting to the issue, Comrade Adetayo Adegbemle said though the GenCos may have good reason to panic, they are not addressing the issues.
Adegbemle, who is the convener of PowerUp Nigeria, wondered if the EERC actually had the right data and might have missed something in the computation of that tariff.
Speaking with LEADERSHIP, he said, “I also believe that their assumption that the FG will continue to subsidise tariffs 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.”
He pointed out that other assumptions in the EERC Tariff Order include offloading the Transmission Industry Fund (TIF) cost component to Enugu DisCo.
He also said he expects the Nigerian Electricity Regulatory Commission (NERC) to issue the EERC the full cost-reflective tariff from the grid to Enugu State, while NISO (Nigerian Independent System Operator) and maybe NBET (Nigerian Bulk Electricity Trading) would demand a bank guarantee to continue to serve the state.
“Meanwhile, we might experience… Enugu can therefore do whatever they wish with the electricity.”
In his submission, Comrade Kunle Olubiyo said the states under the Electricity Act 2023, as amended, have the power to licence investors to undertake projects from generation, distribution to transmission.
Olubiyo said they have the responsibility to annex most of the assets that could help in captive market structure, mini-grid development and even renewables.
The Association of Power Generation Companies (APGC) has warned that the EERC’s action could have repercussions, saying it is capable of creating broader implications for a sector that is currently under pressure.
According to the Chief Executive Officer of the body, Joy Ogaji, the decision could possibly set a precedent that may further undermine the long-term viability of the Nigerian Electricity Supply Industry (NESI).
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