Karnataka announces APPC for FY 2018-19

Recently Karnataka Electricity Regulatory Commission has announced the provisional Average Pooled Power Purchase Cost for FY 18-19. The revised APPC for FY 2018-19 is INR 3.64/unit with effect from 1st April 2018. The variation of INR 7 paisa/unit from last year’s APPC INR 3.57/unit will be paid by ESCOM’s to the RE generators concerned in three equal monthly installments for the energy supplied under APPC during 1st April 2017 to 31st March 2018.

The trend of APPC in Karnataka in the past years is as follows:

KERC Proposes Amendment to RPO Regulation

The Karnataka Electricity Regulatory Commission (KERC) in a recent notification has proposed an amendment to its RPO (Renewable Purchase Obligation) regulation. The amendment will come into force from the date of its publication in the official gazette.

The Proposed amendment defines the solar RPO percentages as well, which was not defined earlier and was considered to be one of the drawbacks towards promotion of solar energy technology. The targets proposed by KERC are shown in the graphs below:

The commission has also proposed new RPO targets for Captive and Open Access consumers, which are in the graphs below:

Apart from the RPO targets the commission has proposed to add the definition of “Contract Demand” and has proposed changes in some clauses as well.

Mainly the commission has proposed that any distribution licensee or other consumers failing to meet the RPO for any year within the time specified, shall purchase RECs to the extent of 110% of quantum of shortfall in meeting RPO, by 30th June of the immediately following year, failing which action under Section 142 of the Electricity Act, 2003 shall be initiated.

The amendment proposes a new way to impose penalty on the consumers failing to meet the RPO, and it directs the consumer to buy REC’s  by 10% more quantum than the total quantum of energy needed to meet RPO targets. The amendment also proposes very high RPO targets for coming years, which is a good move, but again, it will need strong enforcement guidelines from the state.

The increase in RPO targets is important, but at the same time targets without proper enforcement would not yield great results, which needs focus as many states are still being lenient over the RPO compliance by state utilities.

The commission has invited the comments from the interested stakeholder and can be submitted latest by 6th Aug 2015.

The proposed amendment and more details about it can be read here.

Analysis of changes in CSS and its impact on Open Access market

Cross-subsidy regime used as a tool to influence the open access market

In this financial year (FY 2015-16), Andhra Pradesh, Telangana and MP suddenly raised cross-subsidy surcharge (CSS) applicable on industrial units significantly. In the case of AP and Telangana last years’ cross-subsidy was nil, but this year its Rs 2.23 and Rs 1.42 respectively. In the case of MP, the cross subsidy increased from Rs 0.48 to Rs 2.16 (an increase of 350%).

An analysis of several states suggests that cross-subsidy is often increased suddenly and substantially. In each of the above cases, the immediate impact will be that third-party transitions will come to a halt, as they will no longer be viable. For example, in MP the revised CSS is 46% (vs 12% last year) of the applicable tariff. In AP and Telangana, its 40% and 25% respectively.

These three states accounted for approximately 20% of the volume on power exchanges as per the market monitoring report from CERC for February (the most recent available). This volume is likely to dip to insignificance thanks to the steep rise in CSS.

Another good example is the case of Haryana. In FY 2013-14, the applicable CSS was Rs 0.53. Next year it was raised to Rs 2.02 (a four-fold increase). As a result, the traded volume between February 2014 and February 2015 has fallen by half (160 MUs and 86 MUs respectively). One must keep in mind that the above volume includes purchase from Discom’s, if any, on which CSS is not applicable. Thus, the actual fall in volume from open access consumer is must larger.

Changes on the horizon

It is clear from the above examples that cross-subsidy is varied by states to influence the open access market.

However, some fundamental changes are on the horizon. The first one pertains to applicability of CSS on renewable energy. One of the amendments proposed to the Electricity Act, 2003 seeks to remove CSS applicability from renewable energy transactions. This will have a significant impact as it will make RE transactions very attractive. One hopes that states will adopt this in its true spirit.

The second change pertains to the way CSS is calculated by the States. The existing National Tariff Policy (NTP) suggests that CSS be calculated as the difference between the top 5% of the incremental power procured by the Discom (this is often proxy for the most expensive power procured) and the applicable tariff. However, this is a very opaque measure – for example, between 2013-14 and 2015-15, the cost of top 5% of the power in MP fell from Rs 5.47 to Rs 4.59 (a fall of 20%), despite increase in overall costs and tariffs.

The amendments to NTP will require the calculations to be done by taking the overall costs (including the cost of regulatory assets, ie losses incurred by the Discom).



Further, the proposed NTP seeks to limit the CSS to 15% of the applicable tariff in the category. It is noteworthy that till now, NTP has been more recommendatory in nature. For example, it requires that CSS should be brought down progressively to bring it to 20% of the opening level by 2010-11. However, the significant changes done recently clearly indicate that this objective of the policy has not been achieved.

Team REConnect Energy


KERC Consultative Paper for Determination of Solar Tariff

Karnataka Regulatory Commission (KERC) In a notification dated 4th May 2015 has notified a discussion paper for the re-determination of Tariff for grid interactive megawatt scale solar power plants.

The revised tariff to be determined will be applicable to the solar plants entering into power purchase agreement between 1st April, 2015 and on or before 31st March, 2018 but excluding those projects where the tariff is discovered through bidding process.

The commission in the discussion paper has compared recent tariff orders of the states and CERC and based on that has proposed the capitals costs for solar PV projects and solar thermal projects at Rs. 5.720 Lacs and Rs. 1200 lacs per MW respectively.

The commission through a public notice has invited the comments and suggestion from the interested stake holders, which can be submitted on or before 5th June 2015.

The commission discussion paper can be read here.

KERC Revises APPC for FY 14-15 & Finalizes for FY 15-16

The Karnataka Electricity Regulatory Commission (KERC) in its order dated 31.03.2015 has finalized the APPC applicable for FY 15-16 and has also revised the APPC applicable for FY 14-15.

Previously the commission in its notification dated 30.06.2014 set the APPC rate for FY 14-15 at Rs. 3.11 per unit, but now through revision, the commission has reduced that from 3.11 per unit to 3.06 per unit for FY 14-15.

The commission in its order said that as the ESCOM’s have finalized their accounts for FY13-14 and based on the same the APPC for FY 14-15 is to be Rs. 3.06 per unit. The order also said mentioned that the difference of 5 paisa per unit shall be recovered by the ESCOM’s from the RE generators in three equal installments.

The commission in the order has also finalized the APPC applicable for FY 15-16 at Rs. 3.06 per unit, this APPC might go through another revision once the ESCOM’s will finalize their accounts for FY 14-15. The graph below gives the APPC’s given by the KERC in its various orders.

The commission order can reached here.

Solar Rooftop & Net Metering

In recent months many states have formulated ‘Net metering’ policies. These polices herald an exciting phase in the development of solar sector in the country as they will enable every household to become a power generator.
In this article, we have compared the various net-metering approached adopted by states. Some states have formulated regulations, while other have declared policies. While regulations are specific and binding, policies are more directional and state-ments of intent. Further, it is important to study and understand the fine-print of the regulations or poli-cies, as the way the policy works will have a signifi-cant impact on the return made by investors of roof-top projects.
A key difference is in the tariff paid for power ex-ported to the grid. Some states have adopted a ‘feed-in-tariff’ (FIT) approach, while other will al-low carryover of excess power to the next month – implying that the tariff is equal to the retail tariff be-ing paid by the consumer. FITs range from Rs 8.15 to Rs 9.56 per unit – these are significantly higher from the recently discovered prices of MW scale solar

projects of Rs 6- 7 per unit. In the case of offset with retail tariffs, projects will benefit from annual escala-tions, and therefore will see increasing savings over the life of the project.
We believe that net-metering regulations are im-portant to make solar of every roof a reality. How-ever, a key shortcoming in the existing regulations is that the procedure to get net-metering going are missing. Any net-metering project will involve an agreement with the Discom, and this is where pro-cedural and operational challenges will crop up. Simple, yet detailed and time-bound procedures need to be laid out on how to make a roof-top pro-ject a reality. Only Delhi has made some headway in laying down detailed procedures that projects can follow to get net-metering in place.
Table below compares each policy with the other.


KERC Reduces Fuel Adjustment Charge (FAC) to Zero

The Karnataka Electricity Regulatory Commission (KERC) in its new order has reduced the Fuel Adjustment charge (FAC)  to zero for all distribution companies (ESCOM’s) except MESCOM for the second quarter of the 2015 (i.e. Jan to March 2015).

The commission in its order stated that “The Commission, having recognized the decrease in fuel cost adjustment charges for all the ESCOMs except MESCOM in the second quarter of FY15 and the overall increase in power purchase cost, decides to allow all the ESCOMs except MESCOM to adjust the savings in FAC against the overall increase in power purchase cost”.

In the case of MESCOM, the commission has decided to allow collection of FAC to an extent of 1 paisa /unit during the billing quarter January – March 2015. Hence no FAC will collected from consumers of all ESCOM’s except MESCOM separately during January – March, 2015.

The commission in its previous order had calculated 1paisa/unit as FAC, which has now been reduced to zero for other ESCOM’s of Karnataka except MESCOM.

The order can be accessed here.

APTEL directs KERC to revise Wind Tariff in Karnataka

The Appellate Tribunal for Electricity (APTEL) has found calculation errors in the tariff defined by Karnataka Electricity Regulatory Commission (KERC) for Wind generators, in its order dated 10.10.2013.

In a hearing of petition filed Indian Wind Power Association & Indian Wind Turbine Manufacturer’s Association, the tribunal has directed the state commission to re-determine the levellized tariff for useful life of the project.

The Appellants had earlier raised some issues regarding the determination of the tariff by KERC, and requested before the tribunal to direct the state commission to re-determine the tariff.

After hearing both the parties and their respondents and analyzing the facts, the tribunal found that the state commission has made some errors during computation of the tariff, and has thus directed the state commission to re-determine the wind tariff in the state within 3 months of the date of this order.

In our analysis the re-determination of the tariff will result in the little higher tariff compared to the current tariff of Rs. 4.20/unit.

The order can be accessed here.

Our Previous blog post on KERC draft for RE Tariff can be read here.

Contributed by Dheeraj Babariya

KERC Proposes Tariff for Renewable Energy

The Karnataka Electricity Regulatory Commission (KERC) in its latest notification has released the conductive paper (draft) for determination of RE tariff. The tariff proposed will be applicable to the projects commissioned during 01.01.2015 to 31.03.2018.

The draft released is not applicable for Wind, Solar and Biomass projects (with air-cooled condensers), as their tariffs have been defined earlier.

 From the various costs proposed in the draft, it can be expected that the final tariff for Small Hydro, Bagasse based co-gen & biomass projects might come close to tariff defined by CERC for RE sources.

 The commission has invited the comments and suggestion on the draft latest by 20th November 2014.

 The draft notification can be found here.

 Our Previous blog post on Karnataka Biomass Tariff can be read here.

 Contributed by Dheeraj Babariya

KERC: No CSS, Wheeling and Banking charges for Solar power generators

Karnataka Electricity Regulatory Commission (KERC) in its order dated 18th August has exempted Solar Power generators from Cross Subsidy Surcharge (CSS), Wheeling and Banking charges.

On the basis of the comments received by the commission on the discussion paper released by the commission on 7th July 2014, the commission has given this final order. The Summary of the order is as below:

  • All solar power generators in the State achieving commercial operation between 1st April 2013 and 31st March 2018 are exempted from payment of wheeling and banking charges and cross subsidy surcharge for a period of ten years from the date of commissioning. This is also applicable for captive solar power plants for self-consumption within the State.
  •  Captive solar power plants opting for Renewable Energy Certificates shall pay the normal wheeling, banking and other charges as specified in the Commission’s Order dated 9th October 2013.

The table below illustrates the high CSS applicable for commercial consumers availing RE (Non-Solar), under Third Party Sale (For Group Captive consumers CSS = 0). All values in Rs/KWh.

This will bridge the gap between the Solar tariff and Non-Solar RE tariffs prevalent in the state, and encourage more competition between them.

The Commission said that there is need for encouraging solar generation, as only 41 MW of installed solar capacity is existent in the state, whereas the Karnataka Solar Policy aims to achieve 2000 MW of Solar capacity by 2018.

As per earlier order, solar power generators are also exempted from paying transmission charges and are also exempted from wheeling and transmission losses.

The KERC Order can be accessed here

Our previous blog post on the KERC Wheeling charges can be read here.

Contributed by Dheeraj Babariya & Nikhil Dhamankar.

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