The strong reactions that followed the announcement of the decentralization of Nigeria’s electricity sector have not gone away. Recent debates over electricity tariff cuts show that the issue is still very much alive.
When the 1999 Constitution was amended and the Electricity Act 2023 (EA) was passed, views were divided. Some saw decentralization as a step towards better power supply, with each State now able to manage its own electricity market. Others thought it would cause confusion, arguing that the sector was not yet ready.
The recent Tariff Order issued by the Enugu State Electricity Regulatory Commission (EERC) to Manpower Electricity Distribution Limited (MEDL), which is the subsidiary company responsible for Enugu Electricity Distribution Plc’s (EEDC) operations in Enugu State, has brought these concerns back into focus.
This time, the debate is about pricing. EERC set a new rate for band A customers at NGN160/kWh. This is much lower than the NGN209/kWh in the MYTO set by NERC. This raises several questions. Why did EERC set the rate so low? Did it consider the impact on generation companies, especially since MEDL still receives electricity from the national grid?
These and other questions have stirred strong reactions. It may even force some policymakers to rethink certain decisions. However, one thing that must be clear to all players in the electricity sector is that no one should operate outside the established rules.
What Did the Applicable Laws Allow?
It is important to state from the start that the Constitution permits States to run their own electricity markets. The EA simply strengthened this position by making it clear that any law passed by a State House of Assembly to create a State Electricity Market (SEM) remains valid. Based on these legal grounds, 11 States, including Enugu, have now created and are running their own electricity markets.
Under the Electricity Law of Enugu State, the EERC has the legal power to act. It has issued supporting regulations to guide the smooth running of the Enugu State Electricity Market (ESEM), including the tariff order that has become the focus of current debate.
The EA envisions SEMs as fully regulated by States. In other words, each State, through its own regulator, would oversee all electricity operations within its borders. Section 230(2) of the EA confirms this by stating that NERC will hand over regulatory powers to the relevant State regulator. However, the EA limits these powers strictly to the State’s territory.
This is why NERC’s Transfer Orders have made it clear that electricity activities that go beyond a single State or connect to the national grid remain under NERC’s authority. These orders also confirm that NERC still manages the national electricity market. What this means in practice is that electricity transactions that take place only within a State fall under the control of the State regulator. Anything that involves more than one State will also fall under NERC’s oversight to the extent to which it stretches beyond the State in question.
Can EERC set tariffs for the Enugu State market? Yes, it can. The law allows it. But can EERC set tariffs for every transaction involving licensees in the State? For example, if MEDL buys electricity from a grid-connected power plant in Niger State, would EERC’s tariff apply to that transaction?
Leaving aside who may be right or wrong in this particular case, there are certain general principles that need to be taken into account by all concerned actors, as well as for potentially similar issues that may arise in the future.
The regulation of SEMs is a multifaceted activity that has various components. In addition to setting the applicable tariff, this includes licensing, monitoring of service quality, approval of investment plans, consumer protection, and compliance enforcement. In the context of the current decentralized market, the regulatory powers of NERC and the State regulatory bodies may overlap in respect of a particular regulatory activity. This is especially true for tariff setting.
There are various components that come together to make up the end-use tariff that commercial or residential customers pay. If the end-to-end aspects of the generation, transmission, and distribution activities for the tariff linked to a transaction occur completely and entirely within a State, then it is within the absolute and exclusive powers of the State regulator to determine all key components and aspects of that tariff.
However, from reading the Constitution, the EA, and the Transfer Orders, if the national grid is involved in any part of the transaction, whether in terms of power generation or transmission, NERC will continue to oversee the applicable generation and transmission tariff issues. In other words, in such a case, any revision to the generation and transmission tariff should be sanctioned by NERC. Nonetheless, the State regulators will still have jurisdiction over the other aspects that make up the full end-user tariff.
It is only natural that every regulator would want full control of its market. One of the strongest ways to show that control is through tariff setting. However, it is critical for both NERC and State regulators to operate strictly within the legal boundaries defined in the applicable laws in order to maintain regulatory clarity and avoid jurisdictional overreach. Overstepping these limits risks regulatory conflict, market uncertainty, and legal challenge.
Going forward
Understandably, the intention of the reforms introduced through the Constitution and the EA to support the creation of State Electricity Markets (SEMs) was to decentralize, not to fragment, the Nigerian electricity market.
Decentralization, in this context, means a lawful and coordinated sharing of regulatory powers between NERC and State regulators. Each is expected to operate within clearly defined limits while still contributing to the overall functioning of a single, unified electricity system. Fragmentation, by contrast, happens when there is a breakdown in regulatory coordination. This can lead to confusion, inefficiencies, and a loss of confidence in the market due to overlapping or conflicting actions.
To prevent the decentralization of Nigeria’s electricity market from leading to fragmentation, NERC and State regulators must collaborate on issues where their powers overlap. The current case highlights the need for such collaboration. The EA itself recognizes the importance of cooperation between regulatory bodies.
However, it is important to note that the EA does not provide much detail on how to handle overlapping regulatory powers. This is different from other laws, such as the Nigerian Data Protection Act and the Federal Competition and Consumer Protection Act, which contain clearer guidance on how such overlaps should be addressed.
Future amendments to the EA should draw lessons from these other laws. This would help build a stronger legal basis for cooperation, reduce the risk of duplicated efforts, and support the smooth operation of a decentralized electricity market that remains clear, stable, and consistent.