Application of Multiple Tariff Regimes in the NESI

PUBLIC NOTICE

THE APPLICATION OF MULTIPLE TARIFF REGIMES IN THE NIGERIAN ELECTRICITY SUPPLY INDUSTRY

The Nigerian Electricity Supply Industry (“NESI”) was fully decentralised in 2023 with the signing into law of the amendment to the Constitution of the Federal Republic of Nigeria (“CFRN” or the “Constitution”) and the Electricity Act 2023 (“EA” or the Act”). Paragraph 14(b) of Part II of the Constitution, i.e. the Concurrent Legislative List, was amended by removing the previous restriction which limited the participation of federating states in Nigeria on electric power in their respective jurisdictions “to areas not covered by the national grid” and extensive provisions were made in the EA for the orderly transition of powers over intra-state electricity market from the Federal Government of Nigeria (“FGN”) under the auspices of the National Assembly, Federal Ministry of Power (“FMoP”) and the Nigerian Electricity Regulatory Commission (“NERC” or the “Commission”) to subnational institutions upon fulfillment of the conditions specified in the Act.

2. The hierarchy of laws for the operation of a decentralised post-2023 NESI are currently:

3. Paragraphs 13 and 14 of Part II of the Concurrent Legislative List explicitly state the respective powers of both the National Assembly and State Houses of Assembly on NESI matters as follows –

• a. Electricity and the establishment of electricity power stations;
• b. The generation and transmission of electricity in or to any part of the Federation and from one State to another State;
• c. The regulation of the right of any person or authority to dam up or otherwise interfere with the flow of water from sources in any part of the Federation.
• d. The participation of the Federation in any arrangement with another country for the generation, transmission and distribution of electricity for any area partly within and partly outside the Federation.
• e. The promotion and establishment of a national grid system; and
• f. The regulation of the right of any person or authority to use, work or operate any plant, apparatus, equipment or work designed for the supply or use of electrical energy.

• a. Electricity and establishment in the State of electric power stations;
• b. The generation, transmission and distribution of electricity to areas within that State; and
• c. The establishment within that State of any authority for the promotion and management of electric power established by the State.

4. The Commission has transferred regulatory oversight over intra-state electricity markets to Edo, Ekiti, Enugu, Imo, Kogi, Lagos, Niger, Ogun, Ondo and Oyo to regulatory institutions established by those States pursuant to the provisions for orderly transfer of regulatory oversight specified in section 230 of the EA. Full regulatory oversight will be transferred to Plateau on 12 September 2025 while preparatory transfer readiness notices have been received from Abia and Delta.

5. As a definite deadline was not specified by the EA for the completion of transfer of regulatory oversight to all States of the federation by the Commission, a dual regime operates in the intervening period with States that have not exercised the elective transfer option continuing to be under the regulatory oversight of the Commission in accordance with section 230(8) of the EA which provides that “notwithstanding the provisions of section 63(1) and subsection(5), the generation, transmission, system operation and distribution of electricity in a State that has not exercised its option under subsection(2) shall continue to be regulated by the Commission in accordance with the provisions of this Act until such a time as that State exercises the option”.

6. States that have assumed full regulatory oversight over their intrastate markets are now authorised to create and regulate transactions in their State electricity markets within the confines of powers granted to them by the Constitution, the EA and their enabling law; and this extends to the development of tariff methodologies that shall apply to end-use customers in their respective States.

7. As States do not have jurisdiction over the national grid and over electric power stations established under federal laws/operating under licences issued by the Commission; they must holistically incorporate the wholesale costs of grid supply to their States without any qualification or deviation in their design of tariffs for end-use customers in order not to distort the dynamics of the market or be prepared to make a policy intervention by way a subsidy for any deviation in the tariff structure that distorts the wholesale generation, transmission and legacy financing costs in NESI.

8. The Commission’s attention has been drawn to the increasing stakeholders’ concerns on the Tariff Order (Order No. EERC/2025/003) issued by the Enugu State Electricity Regulatory Commission (“EERC”) to its Licensee Mainpower Electricity Distribution Limited (“MEDL”) that relies exclusively on electricity supply (generation and transmission) from the national grid. NESI stakeholders have expressed concern about the consequences of the reduction of tariffs for Band A customers in MEDL’s network area to NGN160.4 per kWh and the freezing of tariffs of customers in the other bands on the wholesale generation and transmission costs along with the financing costs for legacy obligations in NESI. It is pertinent to state that the NGN160.4 per kWh was arrived at largely by reducing the current average Generation Tariff of NGN112.60 per kWh to NGN45.75, with an assumption of subsidy component, a difference of N66.85 per kWh.

9. Section 34(1) of the EA places a statutory obligation on the Commission to “create, promote and preserve efficient electricity industry and market structures, and ensure the optimal utilization of resources for the provision of electricity” and we are also aware that EERC as a sub-national electricity regulator also has a similar statutory obligation in their enabling law; and neither NERC nor EERC as responsible regulatory institutions would take decisions that expose the national grid and wholesale electricity market to a financial crisis in contravention of express powers granted to them by the Constitution.

10. All stakeholders are advised to note that the Commission is currently engaging EERC on their tariff order as it relates to any perceived area of misinterpretation/misunderstanding on wholesale generation and transmission costs on their import of power from the national grid and grants further assurances of its unwavering statutory commitment that the electricity market will be made whole in terms of cost recovery in compliance with the laws of the Federal Republic of Nigeria.

Management