Enugu State: Much ado about electricity tariffs

By Order made under powers conferred on it by the 1999 Constitution, the Electricity Act (EA), 2023 and the Enugu State Electricity Law, 2023, the Enugu Electricity Regulatory Commission (EERC) on July 18, 2025 issued an order titled “Tariff Order for MainPower Electricity Distribution Limited 2025” and thereby, unwittingly, triggered a many-sided debate that has tended more towards sound and fury and less about substance. At its foundation, we must now ask what Nigeria’s federalism truly means; the implications of the amendment of the 1999 Constitution and the EA, 2023; the nature of the subsidy provided to the electricity sector by the Federal Government of Nigeria; and the question how to manage this subsidy regime in an era of electricity distribution sector decentralisation.

Before examining these questions, we must note that the EERC tariff order applies to, and was issued in response to a tariff application made by a single licensee, MainPower Electricity Distribution Limited (MP). The tariff order shows an approved Band A tariff of =N=160.40/kWh, well below the =N=209/kWh established by NERC for Nigeria’s eleven grid-connected Discos that cover the 36 States and FCT. The rates requested by MP for Bands B to E were approved and left untouched by EERC. Historically, since 2006 when the electricity sector was unbundled, even though electricity distribution is the very definition of “local business” electricity distribution tariffs have never been determined for consumers in any one State of the Federation except perhaps Lagos that has two Discos (meaning a tariff is derived only for part of the State).

Before now tariffs have been aggregated by examining a Disco’s costs spread over the various States it covered. So, this is the first time that any regulator has examined the actual costs of providing electricity distribution in a single State. This is clearly the only way to ensure that consumers in any one State pay only the efficient costs of providing electricity to them, as demanded by Section 116(2)(a), Electricity Act, 2023 and, more importantly, Sections 10 and 11(a) and (d) and 34(2), Electricity Law, 2023 of Enugu State. If for no other reason, EERC must be commended for this.

We understand that the Enugu State electricity tariff methodology was the subject of extensive and transparent stakeholder engagement and public hearings by EERC earlier this year, in which its licensee, MainPower, was a participant and some of today’s critical commentators had an opportunity to attend but did not. It is important to note that EERC’s tariff methodology principles are derived entirely from the NERC MYTO Methodology that has been in place since 2009. EERC claims not to have changed a single principle but rather to have applied them in accordance with the Enugu Electricity Policy, the State Electricity Law, 2023 and the Tariff Methodology made under the State Law. In other words, in accordance with the law and without any political pressure from the Enugu State Government.

We also note that, to this moment, no critic has actually pointed how and where in its tariff order EERC ran afoul of the applicable laws or its published tariff methodology. For this reason, this editorial could conveniently stop here and await criticism that pinpoints specific divergences between the EERC Tariff Order and the facts and law that underpin MainPower’s tariff proposal. Unfortunately, an army of experts have weighed in on the matter. NERC and the Minister of Power have stated clearly that EERC has “reduced” the tariff without showing how this is so, and threatening that Enugu State and any other State that does so will pay the difference. In this case, that difference is the subsidy said to be paid by the Federal Government. Why or how a Ministerial statement alone can transfer responsibility for this subsidy payment to a State is difficult for us to fathom.

The EERC tariff order breakdown shows Generation Cost, =N=45.75, based on the NBET vesting contract cost. EERC also made clear that there is a subsidy of =N=45 to be added to this generation cost, that it expects the Federal Government to continue paying; Transmission Cost, =N=10.80. This includes =N=2.17/kWh Transmission Infrastructure Fund (TIF) contribution. Finally, there is a Distribution and Retail cost, =N=68.95, including various cost and profit margin components provided in the EERC tariff methodology.

This adds up to a total Cost-Reflective Tariff of =N=125.50 applied to all Band A customers. Readers should note that the EERC tariff approved for MainPower includes an over-recovery amount of approximately =N=34.90. This is clearly a temporary uplift that is expected to be clawed back in subsequent years when MainPower’s cashflows are expected to improve. This is how EERC’s tariff order shows a final approved Band A tariff of =N=160.40/kWh for MainPower. We note that MainPower’s tariff proposal for Band B to Band E customers was approved without change. Th

All this is all well and good and should cause no complaints, except that Federal Government functionaries, including NERC and the Minister of Power, and the special interest group representing grid-connected Gencos have taken issue with the EERC’s deliberate decision not to add the Federal Government tariff subsidy to the Enugu State end-user tariff.

We understand why EEDC made it very clear that the Federal Government subsidy will not be added to the end-user tariff paid by Enugu State customers of MainPower. The reason is simple. If it is added and paid by Enugu State customers, it would mean at best that the tariff has been eliminated and the customer is now paying the full cost of supply. However, such an understanding, to eliminate the subsidy for Enugu citizens, has not been taken by the Federal Government. At worst, in the absence of a formal termination of the Federal Government tariff regime, it would give an inordinate opportunity to the upstream grid-connected generating companies (Gencos) to game the system and double-dip by collecting the full cost-reflective generation tariff and turn around to claim a subsidy for the same generation tariff from the Federal Government. EERC has no reason whatsoever to concede on the criticism that has attended its decision, if it is truly focused on the Enugu State public interest to pay only fair and efficient electricity tariffs. The moral hazard here is quite clear and it brings us to consider the questions noted at the beginning of this editorial.

There is no question that, under the Constitution, Enugu State and every State in the country has the power to set its end-user electricity (or distribution) tariff in a manner that it deems fit, provided this is done transparently and with the full participation of the relevant licensee. There is equally no question that because the Constitution explicitly mentions only generation and transmission across State borders, but not “electricity distribution”, as matters in which the National Assembly has law making powers, the Federal Government, through NERC or any other entity, has no power to set distribution tariffs in any guise or form. Nigeria’s 75-year history of centrally determined distribution tariffs and States giving up their constitutional rights to the Federal Government does not in any way justify the manner in which Federal Government functionaries have addressed EERC’s MainPower tariff order.

The statement by the Honourable Minister, which assumes that the EERC tariff order “reduced” the end-user tariff and threatening that Enugu State would consequently pay the Federal Government subsidy does not add up. If the Federal subsidy for Enugu State customers is eliminated and the end-user tariff is still cost-reflective, that should be a good thing. In fact, as noted above, all that EERC has done is recognise that the subsidy element of the end-user tariff will continue to be paid by the Federal Government in Abuja (as has always been the case); and not by the customer in Enugu State.

On the question of the electricity tariff subsidy itself, perhaps it is time to provide answers to certain questions and set out a clear path to eliminating it completely. The EERC tariff order demonstrates that if NERC and the increasing body of State electricity regulators focus on their statutory obligation to allow only efficient costs of doing business, it is possible to gradually eliminate the need for the Federal Government’s tariff subsidy completely. Before then, what exactly is the amount of subsidy per kilowatt-hour? How is it paid? When is it paid? To whom is it paid? Since the subsidy is paid for energy actually delivered to customers is it not possible to determine how much is paid per State on behalf of customers in each State? It would be a good thing for NERC and/or the Honourable Minister of Power to disclose how much monthly is paid by the Federal Government on behalf of Enugu State customers. Let us know just how much is actually at stake monthly

If the Federal Government subsidy has been paid on the generation tariff for almost two decades now without a significant improvement in quality and quantity of energy and service, then it is obvious that the subsidy has not yielded positive results. The question therefore arises: if a subsidy is desirable what is the most efficient way to apply it? Is it directly to customer tariffs? Or is it to capital expenditure at one or more of the four elements in the electricity value chain – gas supply and transport or generation or transmission or distribution? Certainly, as more States establish their State electricity markets, they will issue tariffs that clearly situate responsibility for paying for grid-supplied energy partly on the Federal Government, for as long as the latter subsidises electricity consumption and pays for it at the generation level.

What is clear to us is that the EERC tariff order has brought light to the question and this has made certain special interests very uncomfortable. This can only be to the benefit of the customers in Enugu State. It avails nothing for Federal authorities to threaten that energy from the grid will be withheld from Enugu State because the EERC has separated the Federal Government subsidy from the tariff its resident customers are obliged to pay. It is time for the Federal Government, perhaps at the level of the National Economic Council, to explain the mechanics of calculating and paying this electricity tariff subsidy and making transparently clear how much is paid on behalf of customers in each State.

In the end, we must say that the EERC tariff order is a step in the right direction. Given EERC’s transparent breakdown of each component of the tariff to be paid by the electricity customers of Enugu State and the questions raised about the nature of the Federal Government subsidy, a precedent for transparency in disclosing the real costs of providing electricity to customers has been set that should be emulated rather than being rejected and traduced.