KERC Approves Additional Surcharge of ₹0.40/kWh for Open Access Consumers in FY2026

The Karnataka Electricity Regulatory Commission (KERC) issued an order on February 17, 2026, approving a petition filed by the Bangalore Electricity Supply Company (BESCOM) to levy an additional surcharge on open access (OA) consumers. Acting on behalf of all State Electricity Supply Companies (ESCOMs) in Karnataka, the Commission sanctioned an additional surcharge of ₹0.40/kWh (~$0.004). The decision follows a regulatory determination of stranded capacity and fixed cost obligations for the state’s distribution licensees.

Comparison of Rates and Effective Dates

The approved surcharge of ₹0.40/kWh represents a significant reduction from the previous rate. Technical context regarding the implementation and duration is as follows:

• Approved Rate: ₹0.40/kWh.
• Previous Rate: ₹0.82/kWh.
• Effective Date: The surcharge is to be collected starting March 2026 for energy consumed from February 2026.
• Duration and Provisional Status: The rate will remain applicable through the 2026-27 fiscal year (FY2027). However, the Commission noted that the surcharge for FY2027 is provisional and subject to adjustment or true-up based on the final determined surcharge for that year.

Specific Exemptions and Applicability

The levy applies to all open access customers of the respective ESCOMs, subject to the following regulatory exemptions:

• Exemption for Captive Consumption: The surcharge is not applicable to persons who have established captive generating plants for their own use.
• Exemption for Waste-to-Energy: Power produced from non-fossil fuel-based Waste-to-Energy plants is exempt from both cross-subsidy and additional surcharges.
• General Applicability: The surcharge applies to all other OA consumers procuring power from sources other than the distribution licensee.

Petition Background and the “Double Recovery” Adjustment

The regulatory process (OP No. 29/2025) saw a substantial downward revision of the proposed surcharge to ensure the compensatory nature of the levy and prevent the double recovery of costs.

• Original Proposal: BESCOM initially proposed a surcharge of ₹1.65/unit.
• Amended Proposal: On October 29, 2025, BESCOM filed an amendment revising the proposal to ₹0.58/unit.
• Rationale for Revision: The initial proposal of ₹1.65 failed to account for fixed costs already being recovered through demand charges paid by OA consumers to the ESCOMs. To prevent “double recovery,” the Commission mandated the deduction of demand charges from the total stranded cost. The final approved rate of ₹0.40/kWh was reached after further verification of actual audited financial data.

Commission’s Rationale and Stranded Capacity Analysis

The KERC based its decision on Section 42(4) of the Electricity Act, 2003, and the Tariff Policy 2016, which permit distribution licensees to recover fixed costs arising from their obligation to supply when consumers migrate to open access.

• Stranded Power Argument: ESCOMs enter into long-term Power Purchase Agreements (PPAs) based on projected load growth. When consumers opt for OA, the capacity tied up for them becomes stranded, yet ESCOMs remain legally obligated to pay fixed capacity charges to generators.
• Identified Stranded Capacity: The Commission identified a stranded capacity of 1,033.46 MW.
• Data Approximation Constraints: While the Open Access Regulations 2025 stipulate the use of 15-minute interval data, the Commission noted that such granular data for OA consumers was unavailable because generators failed to provide it to the State Load Despatch Centre (SLDC). Consequently, the Commission relied on a “best approximation” by applying a 25% load factor to the total OA energy consumed.

Regulatory Constraints and Hydro Exclusion

The Commission applied specific constraints to the calculation methodology, most notably the exclusion of hydro-electric plants.

• Operational Rationale: Hydro plants are seasonal and treated as “must-run” units for grid balancing and peak management. They are generally not backed down on economic grounds and therefore do not contribute to stranded capacity in the same manner as thermal plants.
• Financial Rationale: The Commission noted that the fixed costs of hydro plants are significantly lower than those of thermal plants. Including them would have risked inflating the surcharge beyond a level that is compensatory and justified.

Technical Data and Final Calculations

The following table details the technical parameters and financial figures approved by the Commission for the surcharge determination: