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By Godswill Michael
The Nigerian Electricity Regulatory Commission (NERC) has introduced a new provision allowing mini-grid operators to exceed standard loss benchmarks, subject to regulatory approval, under its newly issued Mini-Grid Regulations, 2026.
The regulation provides that while default assumptions for tariff setting remain capped at four percent technical losses and three percent non-technical losses, the Commission may approve higher thresholds where justified by project realities.
According to the regulation shared with journalists on Monday, “the Commission may approve a project-specific initial loss allowance above the default benchmark for mini-grids, where justified by the location, remoteness, inherited asset condition, line length, customer density, brownfield conversion, metering status, or other demonstrable project characteristics.”
Under the new framework, technical losses may rise to a maximum of eight per cent, while non-technical losses may go up to five percent, but only with NERC’s approval and subject to strict conditions.
The Commission emphasised that any such approval must be evidence-based and clearly reflected in the tariff model submitted by the mini-grid developer. It added that higher loss allowances must distinguish between technical and non-technical losses and include a phased reduction plan.
Specifically, the regulation states that the elevated loss thresholds “shall be reduced over a period not exceeding thirty-six (36) months from the commercial operation date or such other period as the Commission may approve.”
NERC noted that the provision is designed to accommodate operational realities in underserved and remote areas where infrastructure challenges, long distribution lines, and low customer density often make it difficult to maintain lower loss levels at the early stages of deployment.
The new rules form part of a broader regulatory framework aimed at strengthening Nigeria’s mini-grid ecosystem, improving electricity access, and encouraging investment in off-grid and underserved communities.
Under the 2026 regulations, mini-grids remain classified into isolated systems of up to 5 megawatts per site and interconnected systems of up to 10 megawatts, with clearly defined procedures for registration, permitting, and operation.
The regulation also retains a five-year tariff control period for mini-grid projects, during which operators are expected to recover costs under approved tariff models, subject to periodic review and regulatory oversight.
In addition, NERC reaffirmed its powers to inspect operators’ accounts and adjust tariffs where actual costs or revenues deviate from projections. Communities and stakeholders may also trigger tariff reviews by formally requesting account inspections.
The Commission further mandated that all tariff agreements, whether derived from its approved model or negotiated directly with communities, must be filed for regulatory review to ensure fairness, affordability, and cost reflectivity.
Beyond tariff considerations, the regulation outlines strict reporting, monitoring, and compliance requirements. Mini-grid operators with capacity below 1MW are required to submit annual reports, while those above 1MW must file quarterly operational and commercial reports.
NERC said the updated rules are intended to strike a balance between investor viability and consumer protection, particularly in areas where conventional grid expansion remains limited.
The Commission added that by allowing temporary flexibility in loss thresholds, the regulation aims to support the financial sustainability of mini-grid projects while ensuring that inefficiencies are gradually reduced over time.
The Mini-Grid Regulations, 2026, issued pursuant to the Electricity Act, provide a comprehensive legal and operational framework for mini-grid development in Nigeria, covering technical standards, environmental compliance, customer protection, and dispute resolution mechanisms.
What this means
The new provision signals a shift by NERC to make mini-grid investments more attractive, especially in rural and hard-to-reach areas where power losses are typically higher.
For mini-grid developers, the flexibility to operate with higher loss margins, up to 8 per cent for technical losses, means projects that were previously considered financially unviable may now proceed.
This is particularly relevant in communities with long distribution lines, sparse populations, or ageing infrastructure.
For electricity consumers, however, the implication could be slightly higher tariffs in the short term, since losses are factored into pricing models. Nonetheless, the Commission’s requirement for a phased reduction within 36 months is expected to limit long-term cost impacts and push operators toward efficiency improvements.
For the power sector, the policy is likely to accelerate electrification in underserved and unserved areas by reducing investor risk while maintaining regulatory oversight. By tying approvals to strict conditions and timelines, NERC aims to ensure that the temporary allowance for higher losses does not become permanent inefficiency.
Overall, the move reflects a balancing act between expanding electricity access and maintaining cost discipline, as Nigeria continues to rely on mini-grids to bridge its power supply gap.