Nigeria grid losses cost TCN N2.6bn after missing target

Nigeria’s electricity transmission inefficiencies cost the power sector an estimated N2.61 billion in the first quarter of 2026 after the Transmission Company of Nigeria (TCN) failed to meet the transmission loss target set by the Nigerian Electricity Regulatory Commission (NERC).

According to NERC’s first-quarter 2026 report, the Transmission Loss Factor (TLF) exceeded the regulatory benchmark during the period, indicating that a portion of electricity generated by power plants failed to reach distribution companies and other off-takers.

The TLF measures the share of electricity generated that is either lost during transmission or consumed at transmission substations before it reaches Distribution Companies (DisCos) or export customers.

NERC explained that the lower the Transmission Loss Factor, the more efficient the transmission system becomes, as fewer units of electricity are lost between generation and final delivery.

The commission disclosed that the estimated N2.61 billion financial impact comprised N257.91 million arising directly from transmission losses and N2.35 billion in penalties payable to power generation companies.

The regulator noted that the estimate excludes penalties that may have arisen from service level agreement breaches linked to under-delivery of electricity to distribution companies.

Although lower than the N3.13 billion recorded in the fourth quarter of 2025, the losses underscore the persistent operational inefficiencies within Nigeria’s electricity transmission network.

According to the report, the average Transmission Loss Factor during the quarter was 7.96 percent, exceeding the 7.00 percent target stipulated under the Multi-Year Tariff Order framework.

“The average TLF in 2026/Q1 was 7.96 percent. A TLF of 7.96 percent indicates that for every 100 megawatt-hours of electricity injected into the grid, 7.96MWh is not delivered to DisCos and international customers due to transmission losses or energy consumed at transmission substations,” NERC stated.

The commission noted that transmission performance deteriorated compared to the preceding quarter, when the TLF stood at 7.27 percent.

According to the regulator, the first-quarter performance represented a 0.69 percentage point increase over the previous quarter and an underperformance of 0.96 percentage points relative to the 2026 regulatory target.

NERC warned that exceeding the allowable transmission loss threshold has direct financial consequences for TCN because the additional losses cannot be passed on to electricity consumers through tariffs.

“Exceeding the TLF target means the transmission service provider will not be able to meet its full revenue requirement, as there is no provision to recover the revenue required to cover the excess losses from customers,” the commission said.

The regulator added that TCN must compensate generation companies for electricity that is generated but cannot be billed to distribution companies or other off-takers due to inefficiencies on the transmission network.

“TLF underperformance has additional costs for the TSP because it has to pay GenCos for energy that is not billable to DisCos and other off-takers. The estimated cost of the 0.96 percentage point TLF underperformance during the quarter is N2.61 billion,” NERC stated.

Beyond the financial losses, the report highlighted a deterioration in the operational stability of the national grid, with increased fluctuations in system frequency raising concerns over electricity quality, particularly for industrial consumers.

NERC explained that system frequency is a critical measure of power quality because industrial machinery and sensitive equipment are designed to operate within narrow frequency limits.

Under the Nigerian Grid Code, the national grid is expected to operate at a standard frequency of 50Hz, with an acceptable range of between 49.75Hz and 50.25Hz.

However, the report showed that the average lower daily system frequency during the quarter dropped to 49.11Hz, while the average upper daily frequency rose to 50.72Hz, resulting in a frequency range of 1.61Hz.

This compares with a frequency range of 1.27Hz recorded in the fourth quarter of 2025.

According to NERC, the widening frequency range represented a 26.77 percent deterioration in the stability of the national grid’s frequency profile during the review period.

The commission also reported persistent voltage instability across the transmission network, warning that fluctuations in voltage levels could damage equipment and increase costs for consumers and businesses.

The Nigerian Grid Code prescribes a nominal transmission voltage of 330kV, with an acceptable operating range of between 313.50kV and 346.50kV.

However, average operating voltages during the quarter fell below and rose above these limits, with the network recording an average lower voltage of 304.21kV and an average upper voltage of 349.88kV.

According to the regulator, the transmission system therefore operated outside the prescribed voltage range at different periods during the quarter.

NERC warned that voltage instability, including spikes, dips, flickers and brownouts, could cause significant damage to electrical equipment and impose additional costs on consumers.

The commission noted that severe voltage fluctuations could damage industrial machinery and compel manufacturers to increasingly depend on self-generation and alternative power sources outside the national grid.

“Fluctuations in grid voltage, including spikes, dips, flickers and brownouts, can cause significant harm to consumers and result in substantial commercial losses.

“Extreme cases of voltage fluctuations, particularly at the distribution level, can cause severe damage to industrial equipment, thereby compelling industrial customers to seek alternative sources of electricity outside the national grid,” NERC said.