The Nigerian Electricity Regulatory Commission (NERC) has directed state governments to either reflect the full wholesale cost of electricity in their tariffs or be prepared to provide subsidies to cover any shortfall.
This directive comes as NERC begins the process of handing over electricity regulatory responsibilities to subnational governments.
The Enugu Electricity Regulatory Commission (EERC) reduced the Band A electricity tariff from N209 to N160 per kilowatt-hour on July 21, a move that was met with resistance from electricity distribution companies (DisCos).
In a statement issued on Thursday, NERC clarified that state governments do not have authority over the national grid or power stations established under federal legislation or operating with licences it issued.
“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,” the NERC stated.
This measure, NERC explained, is essential to prevent distortions in market operations.
The commission added that states choosing to deviate from the wholesale cost structure should be ready to implement subsidies to offset any under-recovery that may affect generation, transmission, or legacy financing in the Nigerian Electricity Supply Industry (NESI).
NERC said it has received multiple complaints from stakeholders regarding the Tariff Order (Order No. EERC/2025/003) issued by the Enugu State Electricity Regulatory Commission to its licensee, Mainpower Electricity Distribution Limited (MEDL), which relies entirely on electricity supplied through the national grid.
Read also: NERC meets with Enugu DisCo to address tariff cuts
The Commission stated: “NESI stakeholders have expressed concern about the consequences of the reduction of tariffs for Band A customers in MEDL’s network area to NGN160.4 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 NGN160.4 per kWh was arrived at largely by reducing the current average Generation Tariff of NGN112.60 per kWh to NGN45.75, with an assumption of a subsidy component, a difference of N66.85 per kWh.”
Referring to Section 34(1) of the Electricity Act 2023, NERC reaffirmed its legal responsibility to foster efficient electricity markets and structures and to ensure optimal resource use for electricity provision.
NERC pointed out that EERC also has similar obligations under its own enabling legislation as a subnational regulator.
However, NERC stressed that neither it nor the EERC, as regulatory bodies, should take decisions that risk financial instability in the national grid or wholesale electricity market, as such actions would go against their constitutional mandates.
The commission further advised all stakeholders that it is currently in discussions with the EERC regarding the tariff order to resolve any misunderstandings or misinterpretations related to the costs of sourcing power from the national grid.
NERC reaffirmed its commitment to ensuring that the electricity market in Nigeria moves towards full cost recovery in line with existing federal legislation.
