Electricity Act Sparks Dispute as States Slash Tariffs, Gencos and Discos Kick Back

More states are preparing to lower electricity tariffs following Enugu’s recent decision to reduce Band A charges from ₦209/kWh to ₦160/kWh, effective August 1, 2025.

The move, approved by the Enugu Electricity Regulatory Commission (EERC), has drawn strong opposition from power generation companies (Gencos) and distribution firms (Discos), who argue that such cuts could destabilize the power sector, already burdened by over ₦5 trillion in unpaid debts.

EERC defended its decision, saying the revised tariff reflects federal subsidy interventions intended to ease the burden on consumers. However, Gencos disagreed, describing the assumptions as “unrealistic” and warning that the policy risks worsening the sector’s liquidity crisis.

In a statement, Joy Ogaji, CEO of the Association of Power Generation Companies, said the tariff cut undermines cost recovery for generators, noting that only ₦45/kWh is captured for generation against an actual cost of ₦112/kWh.

Ogaji insisted there is no active subsidy framework, only accumulated debt, pointing out that the ₦900 billion allocation for electricity in the 2025 federal budget is grossly insufficient to cover outstanding obligations and future payments.

States Push Ahead with Tariff Reductions

Despite warnings from operators, several states are following Enugu’s lead:

• Plateau State has confirmed plans to lower electricity rates, with its Electricity Commission Chairman, Bagudu Hirse, saying the initiative aims to ease the cost of living.

• Lagos State is currently analyzing Enugu’s template and will unveil its own tariff plan soon, according to the Commissioner for Energy and Mineral Resources, Biodun Ogunleye.

• Ondo State disclosed that it is finalizing a power purchase agreement, which will enable the state to independently determine electricity prices.

• Ekiti State, however, stated it will maintain the current Multi-Year Tariff Order for now.

Currently, seven states — Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi — have taken control of their electricity markets under the Electricity Act 2023, with others, including Lagos, Ogun, Niger, and Plateau, expected to follow by September.

Industry operators have warned that unless clear mechanisms are put in place to fund cost gaps created by state-driven tariff cuts, the decentralization of the electricity market could trigger financial instability across the sector.