KERC Finalizes APPC at ₹6.73/Unit for FY 2026-27; Directs Truing-Up for Renewable Energy Payments

In a decisive move to align utility disbursements with actual power procurement costs, the Karnataka Electricity Regulatory Commission (KERC) issued an order on April 7, 2026, establishing the provisional Average Pooled Power Purchase Cost (APPC) for the state’s Electricity Supply Companies (ESCOMs) at ₹6.73/unit for the 2026-27 financial year. Effective from April 1, 2026, this determination serves as a critical interim benchmark while concurrently mandating a comprehensive truing-up of payments made to renewable energy (RE) generators during the preceding fiscal cycle.

Revenue Gap Reconciliation and the Truing-Up Mechanism

The Commission’s directive addresses a significant regulatory lag between estimated procurement costs and finalized expenditures. While the KERC had previously implemented a three-year freeze on general tariff revisions (extending to 2027), the regulatory framework specifically permits “top-up” and “truing-up” revisions to reconcile actual financial accounts.

This reconciliation is necessitated by a substantial discrepancy in the data for the previous period:

• Finalized Actual Cost: The actual average pooled cost for FY 2024-25 was finalized at ₹6.73/unit upon the audit of ESCOM accounts.
• Provisional Disparity: This actual figure represents a significant increase over the ₹5.54/unit provisional rate that had been utilized for the FY 2025-26 period.

By finalizing the FY 2024-25 actuals, the Commission has identified a revenue shortfall of ₹1.19/unit for generators, necessitating a formal adjustment to the ESCOMs’ procurement liabilities.

Settlement of Underpayments and Installment Schedule

As the finalized cost (₹6.73/unit) exceeds the provisional rate paid during the FY 2025-26 cycle, ESCOMs are legally required to settle the resulting underpayment to renewable energy generators. To mitigate the immediate liquidity impact on the utilities while ensuring generators are made whole, the Commission has directed a structured disbursement.

The payment schedule for the settlement is as follows:

• Eligible Supply Period: The settlement covers all energy supplied by RE generators between April 1, 2025, and March 31, 2026.
• Disbursement Structure: ESCOMs must settle the difference in three equal installments, providing a phased approach to clearing the outstanding liability.

Analyst View: The “Lower Of” Formula and Ceiling Impact

For renewable energy generators operating under the Renewable Energy Certificate (REC) mechanism, the finalized APPC of ₹6.73/unit serves as a theoretical ceiling rather than a guaranteed payout. Per the Seventh Amendment to the RE Regulations, these generators are compensated based on the “lower of” formula:

1. The finalized Average Pooled Power Purchase Cost (APPC).
2. 75 percent of the generic tariff determined for the specific RE technology.

Regulatory Analysis: From a financial perspective, the ₹6.73/unit APPC is currently irrelevant for most solar and wind generators. Concurrent regulatory papers (such as the KERC’s FY 2026 discussion papers) propose benchmark solar generic tariffs in the range of ₹2.92 to ₹3.47/unit. Consequently, 75% of these generic tariffs will fall well below the ₹6.73 APPC. In this environment, the APPC functions strictly as a high-level cap, and REC-mechanism generators will remain restricted to the significantly lower payouts dictated by the generic tariff clause.

Administrative Standing and Future Revisions

The order was passed by the full Commission panel, comprising the Chairman, the Member (Legal), and the Member. Stakeholders should note that the ₹6.73/unit rate set for FY 2026-27 is strictly provisional. It remains subject to further truing-up and potential revision once the actual power purchase data for FY 2025-26 is audited and finalized at the close of the current financial year.