The Nigerian Electricity Regulatory Commission (NERC) has issued a stern warning to state electricity regulators, declaring that states do not possess the jurisdiction to unilaterally deviate from federally-determined electricity tariffs when importing power from the national grid.
The statement follows a controversial tariff order issued by the Enugu State Electricity Regulatory Commission (EERC), which has drawn significant attention from stakeholders within the Nigerian Electricity Supply Industry (NESI). NERC emphasised that all state regulators must honour the full cost of wholesale power purchases from the national grid or provide subsidies to cover any shortfalls created by lower retail tariffs.
The debate is rooted in sweeping changes brought about by the 2023 amendment to Nigeria’s Constitution and the enactment of the Electricity Act 2023 (EA), which decentralized the country’s electricity market. The legal reforms dismantled the previous monopoly of the Federal Government in regulating electricity, granting states authority to establish their own electricity markets and regulatory frameworks.
Under the new legal regime, states are empowered to legislate and regulate intra-state generation, transmission, and distribution of electricity. However, this autonomy is conditional and does not extend to assets or services sourced from the national grid, which remain under federal oversight.
So far, 10 states—Edo, Ekiti, Enugu, Imo, Kogi, Lagos, Niger, Ogun, Ondo, and Oyo—have assumed full regulatory control over their intra-state electricity markets. Plateau State is expected to follow suit by September 2025, while Abia and Delta States have expressed readiness to commence the transition.
The current controversy was triggered by EERC’s Tariff Order No. EERC/2025/003, which reduced tariffs for Band A customers within the Mainpower Electricity Distribution Limited (MEDL) network to NGN160.4 per kWh. The reduction was largely achieved by slashing the average Generation Tariff from NGN112.60 per kWh to NGN45.75 per kWh—a difference of NGN66.85 per kWh.
Critically, MEDL relies exclusively on the national grid for power supply. This has raised alarms among stakeholders who argue that EERC’s tariff framework distorts the cost structure of the national electricity market and may undermine the financial integrity of NESI.
NERC, in its official response, clarified that while states have regulatory independence within their local electricity markets, they are still bound by the wholesale costs of power sourced from the national grid. Any deviation without a compensatory subsidy constitutes a breach of market rules and risks destabilizing the fragile electricity supply chain.
NERC cited Section 34(1) of the Electricity Act 2023, which mandates the Commission to “create, promote and preserve efficient electricity industry and market structures, and ensure the optimal utilization of resources for the provision of electricity.” This, it argued, includes protecting the financial viability of power generation and transmission companies whose operations span multiple states.
The Commission reiterated that tariff integrity is critical to maintaining investor confidence and enabling cost recovery for power infrastructure financed through public and private investments. Any tariff distortion, especially when it fails to reflect the actual cost of generation and transmission, risks triggering a financial crisis across the electricity value chain.
While EERC is also expected to promote efficiency under its own enabling laws, NERC stressed that regulatory decisions at the state level must not contravene federal laws or disrupt the stability of the national grid.
The EA allows for a dual regulatory framework during the transition phase. States that have not assumed full control remain under NERC’s regulatory purview. However, even states that have transitioned, like Enugu, are required to align their tariff models with national standards when interfacing with the national grid.
NERC warned that tariffs involving national grid-sourced power cannot be arbitrarily adjusted at the sub-national level. It urged state regulators to either respect full cost recovery in their tariff design or introduce policy-driven subsidies to cover any under-recovery.
Despite the firm tone, NERC indicated that it is engaging constructively with EERC to clarify perceived misunderstandings in tariff design. The Commission emphasised its commitment to collaboration and regulatory coherence, stating that the matter will be resolved through dialogue rather than confrontation.
“All stakeholders are advised to note that the Commission is currently engaging EERC on their tariff order as it relates to any perceived area of misinterpretation/misunderstanding,” the statement read.
BUSINESSDAY
