Introduction
The liberalization of Nigeria’s electricity market under the Electricity Act 2023 (“the Act”) introduced a paradigm shift by devolving regulatory powers to state authorities. While this aims to foster competition, attract investment, and ensure a reliable power supply, it has also created legal and regulatory fragmentation, particularly in tariff setting, methodology, and oversight. Tariffs remain a critical mechanism linking cost recovery, the financial viability of electricity distribution companies (DisCos), and consumer affordability. Achieving a balance between cost-reflective, service-reflective, and socially equitable tariffs is therefore a significant challenge in Nigeria’s decentralized market, further complicated by overlapping and competing responsibilities of federal and state regulators. Against this backdrop, it is essential to examine how the current tariff framework operates within Nigeria’s power sector, particularly in the context of state autonomy over electricity markets
The Paradigm Shift in Electricity Regulation
As states move towards establishing their own electricity markets and regulatory frameworks, they remain heavily reliant on bulk power from the national grid, managed and regulated by the Nigerian Electricity Regulatory Commission (NERC) through the Transmission Company of Nigeria (TCN). This dependence creates ongoing intersections between federal and state regulators, particularly in tariff setting, where differing objectives complicate the pursuit of tariffs that are both cost-reflective and socially equitable under the Multi-Year Tariff Order (MYTO) Framework. At the same time, constitutional ambiguities further complicate the allocation of legislative powers. While Paragraph 13(a) of Part II of the Second Schedule to the 1999 Constitution (as amended) empowers the National Assembly to legislate “with respect to electricity,” Paragraph 13(b) refers only to generation and transmission, omitting distribution. Applying the principle of expressio unius est exclusio alterius, this omission suggests that jurisdiction over distribution is reserved to the states. Read purposively, the constitutional framework indicates a deliberate design to vest electricity distribution within the remit of State Houses of Assembly, consistent with the broader allocation of localised matters to the states, a position reinforced by Paragraph 14(b), which expressly empowers states to legislate on the generation, transmission and distribution of electricity.
NERC’s Role, MYTO 2024 Benchmark, and State-Level Tariff Considerations
Under the Act, NERC is statutorily mandated to create, promote, and maintain efficient electricity market structures while ensuring the optimal utilization of resources for electricity provision. Sub-national regulators, such as the Enugu Electricity Regulatory Commission (EERC), hold similar responsibilities under their enabling laws. Both NERC and EERC are expected to exercise their powers in ways that safeguard the national grid and the wholesale electricity market from financial instability, in line with their constitutional and statutory authority.
The Act also grants states greater autonomy to develop and implement their own tariff methodologies for end-use consumers. While this allows states to design tariffs that reflect local market realities, consumer affordability, and distribution challenges, it can create tension with the MYTO principles and NERC’s oversight. MYTO promotes national uniformity in cost-reflectivity, efficiency benchmarks, and sector sustainability. Divergence at the state level may result in inconsistencies and distortions in the national tariff framework. Consequently, states must balance tariff oversight with fiscal responsibility and grid stability. Overly subsidised tariffs can undermine DisCos’ financial viability, while excessively high tariffs may deter investment and threaten affordability for consumers.
Electricity Tariff Governance: Should NERC Exercise Supervisory or Overriding Power?
Within this context, the Act imposes a statutory obligation on NERC to promote an efficient industry structure and safeguard financial sustainability through fair, cost-reflective, and service-reflective tariffs. NERC must ensure optimal resource utilization and that prices charged by licensees are both fair to consumers and sufficient to cover operating costs while allowing a reasonable return. Yet, significant regulatory ambiguities remain, particularly regarding the extent of NERC’s authority vis-à-vis state powers over tariff setting and distribution. These uncertainties are compounded by states’ continued dependence on the national grid for bulk electricity supply. The recent dispute between NERC and EERC over EERC’s tariff order exemplifies this tension and highlights unresolved questions about how federal and state jurisdictions should interact in practice.
NERC Contentions
In its most recent tariff order, EERC undertook a state-level tariff determination exercise and approved a Band A tariff of ₦160.4 per kilowatt-hour, a sharp deviation from the national average generation cost of ₦112.60 per kilowatt-hour. According to NERC, this tariff was calculated assuming a generation cost of only ₦45.75 per kilowatt-hour. This creates a gap of ₦66.85 per kilowatt-hour between the actual cost of electricity received by Mainpower Electricity Distribution Limited (“Mainpower”) from the national grid and the amount Mainpower is allowed to recover under the approved tariff. Without a state-backed subsidy, Mainpower would be required to absorb this shortfall, raising critical questions about financial sustainability and cost recovery.
EERC’s Counterclaim
EERC maintains that under the Act and the Constitution, it has full authority to regulate intrastate electricity distribution and set tariffs in Enugu State. Its recent Tariff Order, based on data from MainPower and NERC-recognised cost parameters, set a Band A tariff of ₦160.4/kWh reflecting actual costs, subsidies, and obligations without artificial adjustments to wholesale generation tariffs. EERC contends that excluding Enugu consumers from federal subsidy mechanisms would be unconstitutional, as these subsidies are funded from the Federation Account accessible to all tiers of government. The tariff reduction followed a rigorous review of MainPower’s costs under the Enugu State Electricity Law 2023 and EERC’s Tariff Methodology Regulations 2024, with federal subsidies applied through the grid generation cost via DisCos’ Remittance Obligation on Nigerian Bulk Electricity Trading Plc. (NBET) invoices. EERC also argues that, since the Constitution does not expressly grant the National Assembly authority over distribution, NERC’s intervention in state-level tariff setting is constitutionally questionable.
Mainpower’s Petition
In response to EERC’s July 18 tariff revision (Order No. EERC/2025/003), MainPower petitioned EERC to suspend the reduction of Band A charges from ₦209/kWh to ₦160.40/kWh. The company argues that EERC failed to follow its own regulations, which require either consensus on cost parameters or, at the very least, a formal hearing before implementing such a tariff cut. From MainPower’s perspective, the lack of procedural adherence breaches due process and creates significant financial strain, as the reduced tariff undermines cost recovery and the reliability of electricity supply. The company warns that if it cannot meet its remittance obligations under the Vesting Contract with NBET, supply disconnections may occur, with cascading effects on Enugu’s electricity market. The petition underscores the tension between state regulatory autonomy and the operational realities of distribution companies dependent on predictable revenue streams. More broadly, it raises a critical question for Nigeria’s electricity sector: how can tariff policy balance short-term consumer affordability with the long-term sustainability of operators and the national grid?
Between Autonomy and Oversight: Navigating the Tensions in Tariff Governance
The current tariff dispute involving MainPower, EERC, and NERC underscores the complexities of Nigeria’s newly decentralised electricity market, raising a central question: how can states exercise their constitutional autonomy in tariff setting without undermining the financial sustainability of operators or the stability of the national grid? The dispute highlights a cost recovery gap, where state regulators, motivated by consumer protection, may set tariffs below the true wholesale cost of power, leaving DisCos unable to recover costs and accumulating debt across the value chain; jurisdictional ambiguity, as the Act and the Constitution devolved regulatory authority to states but did not clearly define how NERC’s national oversight interacts with state tariff-setting powers; and a consumer paradox, in which tariffs aimed at enhancing affordability can strain the financial viability of DisCos, ultimately resulting in service deterioration and potential supply disruptions. These intertwined challenges call for the urgent need for coherent policy and regulatory approaches, which the following recommendations seek to address:
• Towards a Cooperative Regulatory Model: Resolving these tensions requires a cooperative model in electricity regulation. NERC should not wield overriding control but must retain a supervisory mandate to ensure that any tariff set by states is grounded in cost-reflective and technically sound principles, especially where grid-supplied electricity is concerned. At the same time, states must recognise that tariff autonomy carries fiscal responsibility. For as long as states continue to rely on the national grid, their tariff methodologies should remain aligned with the MYTO as the supervening baseline, ensuring consistency and technical soundness. Areas not covered by the national grid, however, may be independently legislated by states to reflect local and contractual realities. Where persistent conflicts arise, this may ultimately necessitate a re-examination of the constitutional framework to clarify the scope of state authority over electricity regulation outside the grid.
• Clarifying Federal and State Responsibilities: The continuing disputes over tariff jurisdiction highlight the need for clearer constitutional language. Amending Paragraph 13(b) of Part II of the Second Schedule to the Constitution to expressly include “distribution” under the National Assembly’s legislative scope would remove the ambiguity that has led to divergent interpretations. However, such an amendment must be carefully crafted so as not to jeopardize state autonomy and defeat the entire purpose the Act seeks to achieve in establishing independent electricity markets, thus ensuring that while the federal legislature sets baseline standards, states retain discretion to regulate distribution within their jurisdictions.
• Institutionalizing Collaborative Tariff Governance: In order to obviate recurring disputes, a permanent federal–state tariff coordination forum should be established. This body would bring together NERC, State Electricity Regulatory Commissions, Distribution Companies, Consumer Groups, and other Stakeholders to align methodologies, share data, and resolve disputes. By embedding structured collaboration into tariff governance, Nigeria can move away from zero-sum jurisdictional contests toward a model that balances autonomy with technical and financial coherence.
Conclusion
The evolving landscape of electricity tariff governance in Nigeria highlights both the promise and the challenges of decentralization. The Act and the Constitution have granted states greater autonomy to regulate distribution and set tariffs responsive to local market realities. However, the disputes between EERC, NERC, and MainPower reveal the tensions that emerge when state autonomy intersects with federal oversight, particularly in areas such as cost recovery, procedural compliance, and reliance on the national grid. Sustainable tariff governance requires a careful balance. States must be allowed the independence to exercise their autonomy, but these must align with sustainable tariff methodologies and national benchmarks that are cost-reflective and practicable.
Ozioma Agu is a Partner at Stren & Blan Partners and supervises the Firm’s Energy, Finance and Infrastructure Practice Group. David Olajide and Onyinye Isikaku are both Associates in the Firm’s Energy, Finance and Infrastructure Practice Group.
Stren & Blan Partners is a full-service commercial Law Firm that provides legal services to diverse local and international Clientele. The Business Counsel is a weekly column by Stren & Blan Partners that provides thought leadership insight on business and legal matters.
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