GenCos reject Enugu’s Band A tariff slash to ₦160/kWh

Nigeria’s power generation companies have raised strong objections to the Enugu Electricity Regulatory Commission’s (EERC) proposed reduction in Band A electricity tariffs, warning that the move is based on flawed subsidy assumptions and could destabilize the already fragile power sector.

In a statement released on Monday, Joy Ogaji, CEO of the Association of Power Generation Companies (GenCos), cautioned that the tariff cut sends a troubling signal to other states and undermines cost-reflective pricing, which is essential for sustaining electricity generation in the country.

The EERC had announced on Sunday its decision to lower the Band A electricity tariff in Enugu State from N209 per kilowatt-hour to N160/kWh, effective August 1, 2025, while keeping tariffs for Bands B through E unchanged.

According to the new tariff order issued to MainPower Electricity Distribution Limited, the adjustment applies solely to Band A consumers—typically those with more reliable electricity supply—prompting concern from industry operators who argue that such revisions could compromise long-term investments and grid stability.

As outlined in Order No. EERC/2025/003, the Enugu Electricity Regulatory Commission (EERC) defended its decision to cut Band A electricity tariffs, describing the move as cost-reflective and aligned with the Federal Government’s subsidy framework intended to ease the burden on consumers.

EERC Chairman, Chijioke Okonkwo, explained that the tariff reduction followed a comprehensive review of MainPower Electricity Distribution Limited’s licence and pricing applications. MainPower is the newly established subsidiary of the Enugu Electricity Distribution Company (EEDC) now operating within Enugu State.

“We conducted a detailed assessment of their costs using the 2024 Tariff Methodology Regulations and our Distribution Tariff Model,” Okonkwo stated. “This process produced an average cost of N94/kWh, which guided our final decision on the tariff adjustment.”

EERC Chairman Chijioke Okonkwo explained that the reduced tariff was made possible due to federal subsidies covering a significant portion of electricity generation costs. “The price is lower because the Federal Government currently absorbs part of the actual cost—charging only N45 out of the real cost of N112 per kilowatt-hour,” he said.

He noted that this subsidy allowed the commission to arrive at an average cost-reflective tariff of N94/kWh within the subnational electricity market framework. Under the revised structure, Band A customers will now pay N160/kWh, while tariffs for Bands B through E remain unchanged.

“Setting Band A at N160 helps MainPower mitigate rate shocks. If and when the subsidy is withdrawn, the savings accrued can support gradual tariff stabilization over time,” Okonkwo added. “Importantly, this tariff structure remains fully cost-reflective and does not depend on state-level subsidies.”

However, power generation companies strongly disagreed with this assessment. Joy Ogaji, CEO of the Association of Power Generation Companies, pushed back on the underlying assumptions of the EERC order, calling them flawed and potentially harmful to the sector.

Ogaji emphasized the need to clarify recent claims that the Federal Government is actively subsidizing electricity generation, warning that such narratives may misrepresent the current financial dynamics of the power industry.

Ogaji challenged the claim that the Federal Government is subsidizing electricity generation, asserting instead that what exists is a growing pile of unpaid debts—not a structured subsidy policy.

“There is no formal policy by the Federal Government on electricity subsidies. What we’re witnessing is simply debt accumulation,” she stated, questioning why the Enugu State government would shift additional financial strain onto the generation companies, who are already grappling with the consequences of unsettled payments.

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Ogaji cautioned that the current tariff framework issued by the Enugu Electricity Regulatory Commission (EERC) rests on shaky financial assumptions—particularly the expectation that the Federal Government will continue covering a N45/kWh shortfall in generation costs, despite the absence of any formal, cash-backed subsidy policy.

“The tariff released by EERC sets a concerning precedent for other states,” she said. “Their order allocates just N45 per kilowatt-hour for generation, while the actual cost stands at N112—leaving a funding gap of nearly 60 percent. This raises serious questions about the financial sustainability of subnational electricity regulation.”

She warned that this approach could complicate Nigeria’s broader power decentralization agenda. “There’s an urgent need to address legacy debts—those incurred after privatization but before states took over power regulation. How does EERC plan to handle its share of sector liabilities? Is it counting on federal subsidies to continue indefinitely, or attempting to assume assets without accepting the associated debt?”

Ogaji pressed further: “Shouldn’t EERC be designing tariffs that reduce dependence on federal support and instead build a market attractive to private investment?”

Highlighting the financial strain on the generation companies, she noted that GenCos are currently owed over N4 trillion. Meanwhile, the Federal Government’s proposed N900 billion electricity support in the 2025 budget falls significantly short—covering less than half of the sector’s average N250 billion monthly generation costs.

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Ogaji expressed concern over the absence of viable financial remedies to address the mounting debt crisis in the power sector, noting that no concrete mechanisms—whether in the form of direct payments, financial instruments, or debt restructuring—are currently on the table.

“With just N900 billion earmarked in the 2025 federal budget for electricity support, serious doubts remain about the government’s ability to settle outstanding arrears or absorb future shortfalls,” she said. “Despite full consumption of the power supplied by GenCos, there has been no corresponding full payment.”

At the same time, stakeholders are questioning the basis on which the Enugu Electricity Regulatory Commission introduced a subsidy for Band A customers—especially after the Nigerian Electricity Regulatory Commission (NERC) had officially removed such subsidies nationwide as of April 1, 2024.