Nigeria Power Generation Crisis: GenCos Reject EERC Band A Tariff Cut as “Flawed Subsidy”
By DAYO ADESULU
The GenCos oppose EERC Band A tariff cut, arguing that the regulator’s assumptions about Federal Government subsidies are unfounded. Learn why this policy may trigger a Nigeria power generation crisis and stall investment.
GenCos Oppose EERC Band A Tariff Cut Amid Subsidy Concerns
Nigeria’s generation firms, known as GenCos, have publicly opposed the EERC Band A tariff cut, warning it risks initiating a Nigeria power generation crisis. The focus key phrase, EERC Band A tariff cut, has stirred heated debate as the Enugu regulator trims the subsidy assumptions on electricity pricing.
On July 1, the Enugu Electricity Regulatory Commission (EERC) announced a reduction in Band A tariff from ₦209/kWh to ₦160/kWh, effective August 1, 2025, while freezing rates in Bands B through E. The move, explained in Order No. EERC/2025/003, intended to reflect power generation subsidies provided by the Federal Government.
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However, GenCos balked. Joy Ogaji, CEO of the Association of Power Generation Companies, issued a statement on Monday, declaring the tariff adjustment misguided and warning it could destabilise the sector’s investment climate.
EERC Band A Tariff Cut: Regulator Cites ₦45/kWh Subsidy Assumption
EERC Chairman Chijioke Okonkwo justified the reduction, citing cost-reflective methodology. He explained they based their calculations on:
- Generation cost: ₦112/kWh
- Federal subsidy assumed: ₦45/kWh
- Resulting average cost: ₦94/kWh
- Band A retail rate: ₦160/kWh, to ease rate shock and prevent state subsidy dependency
Okonkwo said this approach supports MainPower Electricity Distribution Limited as a new EEDC subsidiary in Enugu State while keeping tariffs viable during subsidy phase-out.
Generation Firms Argue: Subsidy Assumption Unfounded, Sector at Risk
In contrast, Ogaji highlighted that this EERC Band A tariff cut hinges on an unsubstantiated assumption of a Federal subsidy. According to her:
- No active or cash-backed subsidy policy exists
- Citing ₦45/kWh without verification is presumptive
- This creates a ₦60/kWh cost gap that GenCos must shoulder, increasing state dependency
- GenCos already bear over ₦4 trillion in unpaid debts, threatening service delivery
Ogaji criticized the tariff as “dangerously flawed”, warning it sets a negative precedent for other states considering tariff autonomy. She warned it could collapse Nigeria’s power generation market by making it unprofitable and deterring investment.
Federal Budget Reveals Sector Funding Shortfall
The 2025 Federal Budget allocated only ₦900 billion to electricity support. However, GenCos incur ₦250 billion in monthly generation invoices, making the budget both insufficient and unsustainable. Ogaji emphasised:
“There are no workable solutions, including cash payments, financial instruments, and debt swaps in sight.”
Without credible subsidy mechanisms or debt relief, the Nigeria power generation crisis deepens as demand grows and revenues stagnate.
Unanswered Questions: Subsidy Source & Debt Accountability
Ogaji also raised critical concerns:
- Is EERC relying on Federal Government subsidies that don’t exist?
- Will states be forced to assume sector debt with no liability transfer?
- How will tariff design attract investors and maintain supply reliability?
She urged EERC to correct its assumptions and create a tariff regime transparent enough to secure investor confidence.
How This Could Trigger a Nationwide Power Collapse
If unaddressed, the EERC decision may produce:
- Widespread non-payment: GenCos already unpaid, may curtail generation
- Plant shutdowns: Older, less efficient plants may cease operations
- Power shortages: Especially in Enugu, but also across the power grid
- Investor withdrawal: Uncertain tariff policies deter future investment
Such impacts would deepen the Nigeria power generation crisis, affecting households, businesses, and national productivity.
Calls for Urgent Tariff and Regulatory Reforms
To prevent disaster, experts recommend:
- Revising the tariff to reflect real generation costs without arbitrary subsidy claims
- Instituting transparent subsidy mechanisms with federal commitment
- Developing debt-relief frameworks including swaps or structured repayment
- Establishing tariff policies across states that balance consumer affordability and sector viability
Power Sector at Crossroads: A Turning Point for Nigeria
The GenCos’ opposition to the EERC Band A tariff cut highlights structural vulnerabilities in Nigeria’s grid. Without corrective action—either funding reforms, policy clarity, or regulatory accountability—the country may spiral into a broader power crisis.
Frequently Asked Questions (FAQs)
1. What is the EERC Band A tariff cut?
Enugu plans to reduce electricity cost for Band A customers from ₦209/kWh to ₦160/kWh starting August 1, 2025.
2. Why do GenCos oppose it?
They believe EERC’s assumption of a ₦45/kWh subsidy is baseless and will shift cost burden to already indebted generators.
3. How much debt do GenCos carry?
They are owed over ₦4 trillion, amid continued underpayment and lack of sector funding.
4. Is the Federal Government providing subsidies?
No active subsidy program exists; the 2025 budget allocated ₦900 billion, far below the ₦250 billion monthly invoice needs.
5. What happens if the situation remains unchanged?
Strained power flows, plant closures, investment loss, and a worsening Nigeria power generation crisis are likely.
6. What needs to happen next?
Stakeholders must establish realistic tariffs, transparent subsidies, debt-relief mechanisms, and investor-friendly policies.
