… Other states back N160/kWh
Industry sources and extensive data obtained by BusinessDay have provided insight into how Enugu Electricity Distribution Company (Enugu DisCo) adopted a data-verification approach to electricity tariff setting, ultimately arriving at a tariff of N160 per kilowatt hour (kWh), a development other states have hailed as a benchmark for transparency and accountability in Nigeria’s power sector.
This move, BusinessDay can report, marks the first time since 2014 that a Nigerian electricity distribution company has gone to such lengths to ensure that pricing is not based on unverifiable assumptions, padded cost claims, or opaque submissions.
The process, initiated in response to a tariff proposal from a private operator, has not only exposed systemic weaknesses in Nigeria’s electricity tariff determination process but also presented a replicable model for other states.
Read also: Enugu’s Band A tariff slash aligned with Electricity Act 2023 – Power Commissioners
Initial proposal: Hefty N209/kWh
The journey to N160/kWh began when MainPower Electricity Distribution Limited, a service provider in Enugu, submitted a tariff proposal to Enugu DisCo requesting approval to charge N209 per kilowatt hour.
Rather than rubber-stamp the figure, a practice common in Nigeria’s electricity market, Enugu DisCo’s leadership took an uncharacteristically firm stance.
“They told MainPower, ‘Go and recheck your data. This number doesn’t hold under scrutiny,’” said a senior industry source familiar with the process.
Enugu DisCo made it clear from the outset that its involvement would focus only on the distribution component, the section within its legal and operational jurisdiction.
“We did not touch the generation or transmission component. Those are the responsibilities of the federal government and NERC,” an official said.
Instead, the Enugu DisCo zeroed in on the distribution cost claims submitted by MainPower, demanding verifiable evidence for every naira listed under distribution.
At the next meeting, MainPower returned with a revised proposal of N186/kWh. Yet again, Enugu DisCo wasn’t satisfied. Its officials invited MainPower to sit down for a detailed examination of the cost structure.
That collaborative data-driven scrutiny, BusinessDay learned, eventually brought the cost down to N160/kWh – a dramatic reduction made possible by removing unverifiable or inflated claims.
Understanding how a tariff is constructed is key. Tariffs in Nigeria are composed of three primary components: generation cost, the cost of producing electricity; transmission cost, cost of transporting electricity from generation stations to distribution networks; and distribution cost, cost of delivering electricity to end-users.
The generation and transmission components are regulated and determined by the Nigerian Electricity Regulatory Commission (NERC), the federal agency responsible for setting rules for the power sector.
Read also: Enugu crashes Band A electricity tariff to N160/kwh
A deep dive into distribution costs
According to the NERC tariff methodology, the distribution component of the tariff is made up of three main cost categories: Return on capital deployed, which includes investment in physical infrastructure such as transformers, feeders, and substations; cost of capital, a weighted average of equity and debt costs; and administrative cost, which includes salaries, office operations, logistics, and other staff-related costs.
Each of these cost items must be backed by verifiable data, and Enugu DisCo insisted on it.
“For instance, if you claim to employ 12 staff and our verification shows you have only six, we will only approve salary costs for six people,” the source explained.
NERC template
It’s important to note that Enugu DisCo did not introduce a new tariff methodology. It strictly followed the NERC tariff framework. What made the difference was the DisCo’s insistence on data verification, something that has been largely absent from Nigeria’s power sector.
“The last time this level of verification was done in Nigeria was 2014,” the source revealed. “The regulatory framework requires such reviews every five years, but there was none in 2019 and none again in 2024.”
This systemic failure has allowed DisCos, GenCos, and even the Transmission Company of Nigeria to operate on unverified, inflated cost claims, which are ultimately passed on to consumers through higher tariffs.
BusinessDay’s findings showed this meticulous approach revealed a web of inflated cost structures that, when corrected, brought the distribution cost down to N125/kWh, a massive drop from the initially proposed N209/kWh.
“Since the current minister came in, has he received any cost verification report from the NERC? Has he verified GenCo data? Has he asked the Transmission Company of Nigeria (TCN) to prove its cost structure? If not, then what’s his objection to Enugu DisCo’s method?” one analyst queried.
“Enugu didn’t invent a new system. They just applied the existing NERC framework properly, for the first time in a decade, and backed it with field verification,” another stakeholder explained.
The negotiation: From N125 to N160
The revised cost raised concerns from MainPower, who argued that the reduction would impact its financial sustainability.
“They said N125 would be hard to work with,” the source recounted.
A negotiation followed, guided by realistic financial expectations and investment sustainability. Enugu DisCo, along with relevant stakeholders, deliberated over what constitutes a fair margin for a private operator in the Nigerian electricity space.
“What’s the typical return on investment in Nigeria? What are the interest rates, inflation risk, and business environment factors?” These were the questions the team used to determine a reasonable profit margin.
Eventually, both parties agreed on N160/kWh, a figure that includes verified costs plus a modest, justifiable profit margin. Contrary to the common criticism of tariff hikes funding lavish lifestyles, Enugu DisCo made it clear that this figure does not include luxury costs such as private jets or luxury SUVs.
Read also: DisCos’ high electricity bills under scrutiny after Enugu’s tariff cut
System built on unverified assumptions
What makes Enugu’s approach even more significant is its contrast to the national practice. BusinessDay findings indicate that no comprehensive cost verification has been done in the Nigerian power sector since 2014, despite regulations mandating such exercises every five years.
“They didn’t do it in 2019. They didn’t do it in 2024,” said the source. “So these companies have been feeding unverifiable cost data into the tariff mechanism, and no one has checked.”
This lapse has enabled power companies to routinely inflate costs, especially around staffing, vehicle fleets, equipment procurement, and operational expenses — and pass the burden on to customers in the form of higher tariffs.
“The NERC tariff framework says ‘efficient cost plus a fair margin,’ but who is verifying what’s efficient?” the source asked rhetorically.
Just political will
At the heart of this transformation is not just access to data, but political will. Enugu State governor’s office reportedly played a critical role, insisting on transparent processes and shielding Enugu DisCo from political and commercial pressures that might have derailed the exercise.
“This is what happens when a government genuinely wants to protect its people. They didn’t say, ‘let’s just rubber-stamp this because that’s how it’s done.’ They said, ‘Prove it.’”
Federal government subsidy angle
Underpinning Nigeria’s tariff debate is the federal government’s subsidy policy. The cost of power generation, invoiced through the Nigerian Bulk Electricity Trading (NBET), is partially subsidised.
By 2024, the federal government was subsidising up to 66 percent of the cost of power generation across all DisCos. For Enugu specifically, the average subsidy rate was 68 percent, meaning the federal government was effectively paying N68 for every N100 worth of electricity delivered to Enugu residents.
A key issue raised by Enugu DisCo is whether this subsidy is justified and sustainable.
“If you want to withdraw that N68, then show us the data. What is the actual cost of generation? Let’s validate it. If not, don’t push the cost to end users without scrutiny,” the source argued.
Other states back Enugu regulator’s decision
On Wednesday, the Forum of Commissioners for Power and Energy in Nigeria (FOCPEN) clarified that the tariff adjustment carried out by the Enugu DisCo complies fully with the Constitution of the Federal Republic of Nigeria, the Electricity Act 2023, and the Enugu State electricity laws.
The forum reaffirmed that the move was both legal and strategic, rooted in a rigorous regulatory process designed to ensure fairness and transparency.
In a statement signed by Eka Williams, chairman of FOCPEN and commissioner for power and renewable energy, Cross River State, and Omale Omale, secretary, and commissioner for power, renewable energy and transport, Benue State, the group emphasised that the Enugu DisCo’s review was a product of extensive analysis, including a careful examination of MainPower Electricity Distribution Company’s capital and operational expenditures, customer tariff classifications, and regulatory asset base.
The group stated that a finding had revealed that some lifeline customers on premium Band A feeders were paying as low as N4.00/kWh, including a prominent former military administrator.
This, the forum, said prompted the commission to implement a cost-reflective tariff structure that ensures fairness and sustainability.
“This rigorous assessment was conducted using data and information provided by the distribution company itself. Enugu DisCo also carried out a rigorous assessment of MainPower’s existing customer tariff classification and regulatory asset base,” the forum stated.
FOCPEN also addressed growing concerns among stakeholders, especially electricity generation companies (GenCos), over potential revenue losses.
It assured that intra-state regulatory actions do not affect the wholesale electricity market, which remains under the jurisdiction of the NERC.
“The fear among GenCos that Enugu State’s tariff review will negatively impact their revenue streams is unfounded. The Enugu DisCos actions do not touch wholesale tariffs or transmission charges, which are securely regulated by NERC and were duly factored into EERC’s calculations,” the Forum clarified.
It also reiterated that Nigerian states are not seeking to impose arbitrary tariff cuts or revert to unsustainable federal electricity subsidies.
