Pressure mounts on seven states to follow Enugu DisCo’s Band A tariff cut

Seven states that control their electricity markets by the Electricity Act 2023 are coming under pressure to review tariffs after the Enugu State Electricity Regulatory Commission (EERC) rolls out its landmark move to slash Band A electricity tariffs by nearly 24 percent from N209/kWh to N160/kWh, effective August 1, 2025.

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’s Bold Move

In July, EERC announced that MainPower Electricity Distribution Limited, the newly licensed distributor in Enugu, would reduce Band A tariffs to ₦160 per kWh—down from ₦209—while keeping Bands B through E unchanged.

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 ₦94/kWh, made possible by presumed federal subsidy on generation of ₦45 out of ₦112 costs.

Okonkwo emphasised: “Band A at ₦160 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.

States signaling interest

A senior oil executive in the power sector told BusinessDay the disaggregation into State electricity markets compels closer scrutiny of how and for what Discos incur costs that they pass on to customers.

“That can only be a good thing. It makes the ongoing effort driven by the Enyinnaya Abaribe Senate Committee on Power to amend the Electricity Act to reverse this constitutional mandate to disaggregate into State markets very likely not to succeed because the States will push back very hard,” he said.

Despite vehement pushback, several states have signalled their intention to follow Enugu’s lead. Seven states, including Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi, have now assumed regulatory control under the Electricity Act 2023, which devolved authority over generation and distribution to state governments.

Four more, 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 percent of national power consumption, Lagos 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, lesioned to “already carrying out similar plans,” Ondo says it is 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 completes, citing a desire to retain federal backing.

GenCos react

Unsurprisingly, the move has triggered strong opposition from both generation and distribution companies. The Association of Power Generation Companies (GenCos), headed by 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 ₦45 per kWh is captured out of ₦112 actual cost. This portends a bigger issue.” GenCos have reportedly owed entities over ₦4 trillion in accumulated debts, a situation they argue is worsened by such regulatory moves.

Federal capacity & debt worries

Central to the debate is whether the Federal Government (FG) can continue subsidising the sector. GenCos contend that while N900 billion was budgeted in 2025 for electricity support, this is insufficient against monthly generation invoices of about ₦250 billion. Without workable debt settlement mechanisms like cash payments or swaps, the sector remains financially exposed.

Regulators like Okonkwo argue that federal subsidy—whether policy-based or debt-based—must benefit consumers, not just producers. But critics demand clearer accounting: how much subsidy is ongoing, and whether states are equipped to shoulder new liabilities.

Investor Sentiments & Legal Implications

The Enugu cut raises deeper questions. By seemingly prioritising state-level subsidy over established cost recovery, investors worry: Will such tariff volatility deter private capital?

“As far as investors are concerned, certainty in revenue flows is key,” warns an industry survey conducted by sector analysts. If states voluntarily opt to absorb cost instead of consumers, private players need clarity on government funding, not reliance on timely federal transfers or debts.

Legal experts have also pointed out constitutional concerns: states enacting laws that contradict federal regulation risks judicial invalidation. DisCos have cautioned that Enugu’s move risks costly courtroom battles unless accompanied by clear budget allocations or emergency funding frameworks.

Consumer & Advocacy Reactions

Some consumer rights advocates have welcomed Enugu’s reduced Band A rate—partly because Band A feeders generally enjoy 20–24 hours of power and thus reflect higher-income or high-consumption segments.

That means Enugu’s Band A tariff cut might not fully extend to lower-income users, but could show consumers that regulatory responsiveness is possible at the sub-national level.

Others, however, caution that temporary relief must be matched by reliable service. EERC’s new requirement for daily service reports and feeder downgrades is thus seen as a step in the right direction, but critics call for transparency in enforcement.