GenCos kick against Enugu's Band A tariff cut to N160/kW

Power Generation Companies Oppose Enugu's Tariff Cut to N160/kWh, Cite Risks to National Power Sector

Nigeria's power generation companies, under the umbrella of the Association of Power Generation Companies (GenCos), have expressed strong opposition to the Enugu Electricity Regulatory Commission's (EERC) recent decision to cut the Band A electricity tariff to N160/kWh. The GenCos argue that the move is based on dubious subsidy assumptions and could have far-reaching consequences for the country's already fragile power sector.

The disagreement centers around the EERC's announcement on July 30, 2025, to reduce the tariff for Band A customers from N209/kWh to N160/kWh, effective from August 1, 2025. While tariffs for Bands B, C, D, and E remained unchanged, the decision has sparked widespread concern among industry stakeholders, particularly power producers who argue that it fails to account for the true cost of electricity generation.

EERC's Position: A Subsidy-Fueled Adjustment

The EERC defended its tariff revision, stating that it was in line with the government's ongoing subsidy scheme for electricity generation. In a statement released on Sunday, Chijioke Okonkwo, Chairman of the EERC, explained that the reduction in Band A tariffs was a necessary response to the economic realities of the state's electricity market. He explained that the price for Band A customers had been adjusted in accordance with the Tariff Methodology Regulations 2024, based on an average cost of N94/kWh.

Okonkwo emphasized that the Federal Government's subsidy on power generation was key to maintaining lower prices for consumers, noting that the government was covering N45/kWh out of the actual N112/kWh generation cost.

"The adjustment to N160/kWh for Band A customers is designed to mitigate the impact of rate shock and ensure that the tariff remains cost-reflective while providing sufficient stability for MainPower, the distribution company serving the state," Okonkwo explained. He further noted that if subsidies were removed, the tariff savings would help stabilize rates over time, without necessitating further state subsidies.

GenCos Challenge the EERC's Assumptions

However, GenCos have strongly disagreed with the EERC's reasoning. Joy Ogaji, CEO of the Association of Power Generation Companies, criticized the EERC's reliance on a flawed subsidy assumption. According to Ogaji, the assumption that the Federal Government would cover a 60% cost gap between N45/kWh and N112/kWh is highly problematic, particularly given the Federal Government's lack of a formal policy on electricity subsidies.

Ogaji pointed out that there is no official subsidy program for electricity generation at the national level, and the ongoing debt accumulation in the sector has left GenCos shouldering the burden of unpaid subsidies. The CEO warned that such decisions could set a dangerous precedent for other states, potentially forcing them to rely on unsustainable subsidies while ignoring the true cost of power generation.

"The EERC's tariff order assumes that the Federal Government will continue to cover the subsidy gap, but there is no clear plan for how these obligations will be met. With **over N4 trillion owed to power generators, the reality is that the sector is deeply indebted, and the EERC's stance could exacerbate this crisis," Ogaji explained.

A Growing Crisis of Power Sector Debt

The power generation sector has long been plagued by unpaid debts. The GenCos, who produce the electricity consumed across Nigeria, are owed a staggering N4 trillion by both the Federal Government and the electricity distribution companies. Despite the sector's heavy reliance on subsidies to keep consumer prices low, there are no viable solutions in sight to address the mounting debt, which is growing monthly at a rate of N250 billion.

Ogaji highlighted that the 2025 national budget allocates only N900 billion for electricity support, a figure she deemed insufficient to address even half of the sector's annual generation costs. She expressed concern that without a long-term plan to address the sector's debt crisis, the power industry will continue to face major financial challenges.

"There are no workable solutions, including cash payments, financial instruments, or debt swaps, to address the sector's issues. The power generated by GenCos is being consumed fully, yet the payments for these services remain largely unpaid," Ogaji lamented.

Concerns Over Tariff Adjustment's Long-Term Impact

The tariff reduction in Enugu has raised further questions about the broader implications of such decisions for the country's electricity market. Experts are asking why the EERC chose to subsidize Band A consumers when the Nigerian Electricity Distribution Company (NEDC) removed the same subsidy for its consumers earlier in April 2024.

In particular, industry players are concerned about the decentralization of electricity regulation to state-level bodies like the EERC. With each state potentially setting its own tariffs, the absence of a uniform national policy could lead to disparities in electricity pricing across the country, which might undermine investor confidence in the sector.

The Path Forward for the Nigerian Power Sector

As the EERC's tariff revision takes effect, the broader question remains: How can Nigeria balance the need for affordable electricity with the realities of cost-reflective pricing? The GenCos continue to stress the need for a nationally coordinated approach to tariff setting, one that accounts for the real cost of electricity generation and ensures that subsidies are sustainable.

The power sector's debt crisis, compounded by the lack of clear policy direction, requires urgent attention from both the Federal Government and state regulators. If Nigeria's electricity market is to attract the investment needed to meet growing demand, a more transparent, stable, and predictable pricing system will be essential.

For now, the EERC's tariff cut has exposed deep-seated issues within the power sector and has triggered renewed calls for a re-evaluation of Nigeria's approach to energy pricing, subsidies, and sectoral reforms. As stakeholders continue to weigh in on the ongoing debate, the outcome will likely have significant consequences for the future of electricity distribution and generation in Nigeria.