States, Discos clash over tariff cuts, electricity control

Amid growing public outcry over the unaffordable cost of electricity and allegations of exploitation by power suppliers, energy commissioners from Nigeria’s 36 states have signalled their intention to engage power distribution companies in talks aimed at easing the burden on residents.

Their goal: to negotiate fair and sustainable tariffs that reflect economic realities without overwhelming households.

This move follows the Enugu Electricity Regulatory Commission recent reduction of Band A tariffs from ₦209/kWh to ₦160/kWh, an adjustment that sparked backlash from both generation and distribution companies, who claim the new rates threaten the viability of their operations.

Despite the financial strain reported by citizens, power distribution firms have resisted any negotiation with state authorities, warning that such interventions could destabilise the power sector.

Meanwhile, the EERC remains firm in its stance, defending the revised tariffs and the principle of state-level regulation.

In line with the Electricity Act 2023, seven states—Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi—have already assumed control over their electricity markets, with others like Lagos, Ogun, Niger, and Plateau expected to complete their transitions by September.

The Chairman, Forum of Commissioners of Power and Energy in Nigeria, who doubles as the Commissioner of Power and Renewable Energy for Cross River State, Prince Eka Williams, stated that though some states might have the wherewithal to subsidise the power supply of their residents, the aim of state governments was mainly to ensure adequate power supply in their states.

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 peculiar electricity market dynamics, licensee cost structures, consumer needs, and regulatory assessments,” he stated.

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 said 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.

Also Read: Nigeria’s electricity subsidy hits ₦1.94tn in 2024

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.

But 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.

Sentinel News