Commissioners of energy from all 36 states announced on Wednesday their intention to engage with electricity distribution companies in discussions aimed at setting fair and affordable electricity tariffs for residents.
This move comes in response to the recent reduction of electricity tariffs for Band A customers by the Enugu Electricity Regulatory Commission, from N209/kWh to N160/kWh—a decision that was met with opposition from both electricity generation and distribution companies.
Despite this, the distribution companies have rejected the idea of entering into tariff negotiations with individual states, warning that such actions by state governments could potentially harm the power sector if not handled properly.
The EERC, meanwhile, has stood firmly by its decision and has shown no signs of backing down in the face of resistance from power generators and distributors. States have also defended their authority to oversee power regulation within their territories.
Recently, the Nigerian Electricity Regulatory Commission revealed that seven states—Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi—now independently manage their electricity markets under the provisions of the Electricity Act 2023. Additional states, including Lagos, Ogun, Niger, and Plateau, are expected to finalize their transitions by September.
In an interview with The Punch on Wednesday, Prince Eka Williams, Chairman of the Forum of Commissioners of Power and Energy in Nigeria and Commissioner of Power and Renewable Energy in Cross River State, noted that while some states may be financially capable of subsidising electricity for their residents, the primary goal of state governments is to ensure a steady and reliable power supply.
He insisted that the Electricity Act 2023 had empowered the states to regulate the sector in their domains, and resisted attempts to counter this development.
“Without any equivocation, each State Electricity Regulator is uniquely positioned to determine and implement appropriate electricity tariffs that are fair to customers and at the same time, catalyse investments within their electricity markets, depending on their perculiar electricity market dynamics, licensee cost structures, consumer needs, and regulatory assessments,” he stated.
Asked whether state governments were ready to bear the burden of electricity subsidies, as declared by the power minister following the slash in tariffs by Enugu state, Williams replied, “Well, it’s not something I want to unilaterally agree or disagree with. The power sector is currently being tested, and there’s a lot of experimentation going on. There’s no one-size-fits-all approach.
“What’s important is that all stakeholders sit at the table to discuss these issues, taking into account the unique circumstances of each state. States operate differently. So, any governor who feels inclined can say, ‘I’m ready to shoulder this responsibility.’
“I believe what the minister is suggesting is that states can and should have more input in shaping the electricity conversation. But it’s still an ongoing dialogue. It’s not something you can pin down as a definitive statement, it requires extensive consultation and engagement.”
Also, in a statement on Wednesday, the Forum of State Commissioners of Power and Energy said the claims by the power generation companies were unfounded, allaying fears that the decision of Enugu to reduce the tariff of Band A would negatively impact its revenue streams.
The forum, speaking on behalf of the 36 states, said it was ready to negotiate with the Discos operating in their states. However, power distributors told The PUNCH that they were not ready for any negotiation with the states, who they alleged were trying to sabotage the successes recorded in power generation lately.
Recall that states like Lagos, Ondo and Plateau have indicated their interest in slashing tariffs. But the Enugu power regulator insisted that there was no point retaining the Band A tariff at N209/kWh, defending its decision scheduled to take effect from August 1.
Speaking on behalf of the states, the forum Chairman, Williams, and Secretary, Omale Omale, noted that the Enugu government’s policy did not extend to the wholesale market where Gencos operate.
The forum explained that the downward reduction in electricity tariffs by the Enugu Electricity Regulatory Commission was duly aligned with the provisions of the Electricity Act 2023.
The forum also said the new tariff by the Enugu Electricity Regulatory Commission followed a comprehensive and meticulous review process of thorough examination of the capital and operational expenditures and assumptions of MainPower Electricity Distribution Company operating in the state.
“The Enugu Electricity Regulatory Commission carried out a rigorous assessment of MainPower’s existing customer tariffs classification and regulatory assets base of N4.00 kWh on Band A feeders. The EERC, acting within the ambit of its regulatory provisions, has set tariffs approximately based on its findings, aiming for a cost-reflective and fair market for consumers and operators alike,“ the statement read in parts.
While stating that Enugu State based its regulatory findings and specific market conditions on the downward tariff adjustment, the forum noted that this did not amount to other states applying the same approach.
“For instance, several states, Ekiti, Ondo states, and others have issued tariff orders maintaining the present MYTO tariffs,” it stated. FOCPEN assured investors and the Nigerian Electricity Supply Industry that states did not arbitrarily reduce tariffs or depend on unsustainable electricity subsidies by the Federal Government.
“On the contrary, states are resolute in their call for the removal of untargeted and opaque federal subsidies, advocating instead for the establishment of truly cost-reflective subnational and wholesale electricity markets. States, including Enugu, are sectors where electricity tariffs accurately reflect the cost of service delivery, thereby encouraging investment and efficiency,” the group added.
It noted that the tariff for wholesale generation and transmission services, which fall under the purview of the Nigerian Electricity Regulatory Commission, remains secure and unaffected.
In an interview, the Chief Executive Officer of the Association of Nigerian Electricity Distributors, Sunday Oduntan, said the association would not engage in any negotiation with the states. Oduntan argued that the states were trying to put Nigeria into darkness with the slash in tariffs, saying it is not sustainable.
“We are not negotiating with the states. What they are doing will destroy the market. If they continue like this, the power supply will drop again. Can’t you see that there’s an improvement in power supply these days? Everything will go back if this tariff cut continues in the states. These states just want to create a shortfall. If there’s no funds, there will be a crisis,” Oduntan warned.
Enugu defends position
Meanwhile, the EERC clarified that its recent tariff cut did not tamper with the prevailing cost of power generation in the country in any way. The commission maintained that, based on MainPower’s costs, there was no justification to keep the price of electricity for Band A at N209/kWh in the state.
In a statement by EERC’s Commissioner for Electricity Market Operations, Reuben Okoye, the agency maintained that although it inherited the current tariff regime, “the commission is focused on developing a sub-national electricity market that is transparent, accountable, reliable and sustainable and therefore will review utility costs of service to achieve its mandate to the people of Enugu.”
EERC further clarified, “The Order is for MainPower’s operation in Enugu State. It does not affect electricity services in other states, between states and across the country. The cost of delivering electricity from the national Grid to MainPower via EEDC has been accommodated in full. We did not tamper with that cost at all in our tariff determination, but rather adopted it.
“Our order ensures that MainPower recovers all its efficient costs and makes a reasonable return in its business of providing electricity services to citizens of Enugu State. Considerations and reconsiderations of the MainPower tariff application and data still present the same outcome that ensures full payment of invoices to all parties.”
On the justification for tariff reduction, EERC said that “having gone through its rigorous process, EERC has no rationale or justification to keep Band A at N209” in the state.
“EERC has not removed a kobo from the generation and transmission costs of delivering power to Enugu State, but rather included the exact costs to ensure complete payment of MainPower’s portion of the Nigerian Bulk Electricity Trading Plc invoices. Also, MainPower’s share of EEDC’s debts arising from CBN’s interventions in the NESI was included in the tariff.
“EERC and MainPower also reviewed all the relevant data/information provided by MainPower for its tariff determination to ensure accuracy,” it was stated.
The agency said it would be willing to entertain any evidence that showed that its calculations were wrong. “We are willing to entertain any evidence that shows that our methodology, analysis, computation, and output are wrong. The total focus on the reduction of Band A tariff by some commentators is rather unfair to the commission and to electricity consumers in Enugu State.
“It is important to say that with the ongoing migration of more customers to Band A, the general cost of delivering electricity is spread across larger customer numbers, which should also result in a reduced cost of service delivery,” EERC added.
Continuing, the commission noted that the emerging issue or question is: should customers in Enugu State be over-billed for electricity services, and if so, for whose benefit?
“The fact remains that Gencos will not get the over-recovery from any Subco until a cost-reflective tariff is adopted across the board in the country. So, their present concerns are misdirected. We stand ready to provide clarification as well as engage concerned stakeholders so as to provide assurances regarding the order.
“Again, for emphasis, let us be clear that this tariff Order is only applicable to Enugu State, as it was developed after considering the circumstances, information and data of MainPower in the state,” the statement said.
The commission, therefore, invited Gencos that are ready to operate with effective contracts based on a willing-buyer, willing-seller commercial arrangement to consider setting up power plants in Enugu State.
“We will consider and approve the PPA and tariff for them to do their business, as the PPA cost will be a natural pass-through in the tariff,” EERC concluded.
The Lagos State Commissioner for Energy and Mineral Resources, Biodun Ogunleye, has lamented that the state’s effort to control electricity is being frustrated by electricity distribution companies in the state.
“You know we are battling with our Discos; they are not in agreement with anything we are doing, and the Discos are the ones behind this amendment bill that is in the Senate,” he said.
He explained that, unlike Enugu, the efforts to negotiate things are “increasingly difficult” but noted that Lagos would soon announce its tariff plan from next week.
Credit: The Punch
