Science and Education Publishing American Journal of Modeling and Optimization 2333-1267 3 1 2015 02 09 Simulation for Pricing Electricity Consumptions in Nigeria and Hedging of Generation and Transmission Costs 7 21 EN Oyediran Benjamin Oyelami National Mathematical Centre Abuja, Nigeria Adedamola Adewumi Adedoyin AJMO2015312 10.12691/ajmo-3-1-2 2014 05 05 2015 02 05 2015 02 09 In this paper, simulations are carried to obtain fair electricity tariff for domestic consumption in Nigeria using the Ornstein-Uhlenbeck model and Monte Carlo method. The fair price also determined for transmission companies to buy electricity from the generating companies through European option derivative contracts. The fair price for a call option using Monte Carlo simulation is found to be 0.310 Naira and put price written by transmission companies to the distribution companies is found to be 0.307 Naira and finally, price sensitivity analyses for companies' portfolio are made also.