Lagos adopts metered electricity payments, signs three IPP deals

The Lagos State Government on Sunday formalised three Power Purchase Agreements with Independent Power Producers as part of efforts to expand embedded electricity generation and improve power supply to critical state infrastructure, The PUNCH reports.

The agreements were signed at Lagos House, Marina and covered Fenchurch Power, Mainland Power, and Viathan Engineering Limited, with government officials describing the move as a shift toward a more competitive, market-driven electricity framework.

Speaking at the signing ceremony, the Commissioner for Energy and Mineral Resources, Biodun Ogunleye, said the state was concluding agreements with “three out of the four IPPs the state government has deployed to meet its electric power needs over the years,” adding that the framework represented a restructuring of Lagos’ embedded power system.

According to him, “Fenchurch is a brand new contract for our major water facilities in Adiyan and Iju and its environment,” while Mainland Power remains a “renewal that is now expected to grow to be a major embedded assets serving, the Ikeja, Ikeja GRA, Oshodi and Anthony.”

He added that Viathan’s assets were already being integrated into a wider network, stating that it “is already undergoing embedded assets conversation with Eko Disco and would continue to guarantee dedicated premium services to our facilities.”

The commissioner explained that all agreements had been redesigned to align with current market conditions and to strengthen decentralised power generation.

“All agreements have been revised to reflect our transition to a market environment, and all assets are positioned to be the first anchor in the provision of generation services in the network where they are situated,” he said, adding that regulatory discussions with distribution companies were ongoing.

A major policy shift under the new framework is the elimination of legacy payment structures previously considered inefficient.

He stated: “On the part of government, we see the new contract regime eliminated concepts such as take or pay, deemed energy and all platforms where we were paying for zero production by enforcing payment at delivery points for metered supplies, thus reducing our cost of running the business of government.”

He further noted that Lagos is deliberately building redundancy into its infrastructure, saying: “We have also made efforts to ensure most of our essential facilities have dual sources, thus ensuring g overnment business does not suffer on account of the action and inaction of partners as we have previously experienced.”

Projecting future capacity growth, he disclosed that Lagos expected a major expansion in generation output.

“From a current capacity of less than 60MW, we see this plant scale up to over 200-400MW in two to three years without draining the treasury but competing in the marketplace to provide sustainable energy to our citizens,” he said.

Governor Babajide Sanwo-Olu, who witnessed the signing, said the agreements were designed to strengthen existing capacity and correct inefficiencies in earlier arrangements.

“Today at Lagos House, Marina, I witnessed the signing of three power purchase agreements designed to build on existing capacity and address what has not been working,” he said.

He explained the specific roles of each IPP within the state’s embedded power structure.

“Fenchurch Power will support our major water facilities in Adiyan and Iju. Mainland Power will continue serving Ikeja, Oshodi, and Anthony, with room for expansion. Viathan will maintain a stable power supply to key facilities on the Island as we strengthen its integration with the distribution network,” Sanwo-Olu said.

The governor stressed that the revised contracts reflected a stronger emphasis on accountability and efficiency in public spending.

“We have updated these agreements to reflect current market realities. We will no longer pay for power that is not delivered. Payments are now tied to actual, metered supply, helping us reduce waste and manage costs more effectively,” he stated.

He added that the reform would improve service delivery and strengthen state infrastructure resilience.

“This means more reliable power for public infrastructure, better use of state resources, and a clear path to scale capacity over the next few years,” the governor said.

Under the agreements, Mainland Power Limited will continue supplying electricity to Ikeja, Oshodi, Anthony, and surrounding areas, including key public institutions such as LASUTH, under a renewed 10-year arrangement.

The Akute Independent Power Plant, operated by Fenchurch Power Limited and Aggregate Utilities Limited, is being repositioned after years of dormancy, with plans to restore generation capacity and support water infrastructure projects, including the Adiyan Water Works.

Viathan Engineering’s Island Power Limited and Peninsula Integrated Power Project will continue supplying electricity to Lagos Island facilities, including government residences, hospitals, and strategic administrative hubs, using hybrid and dual-fuel systems.

The Lagos State Government said the reforms are part of a broader strategy to decentralise power generation, improve reliability, and ensure long-term sustainability of electricity supply across critical public assets.