If the Karnataka Electricity Regulatory Commission (KERC) has its way, by April 2024, consumers in Karnataka will know how much they would have to pay as electricity tariff until FY 2026–27.
The commission has proposed a multi-year tariff (MYT) framework for retail electricity supply for the first time under the Draft Karnataka Electricity Regulatory Commission (Multi Year Transmission, Distribution and Retail Supply Tariff) Regulations, 2023.
The MYT system does not mean the same tariff rates for three years. While the KERC will file tariff orders every year as usual, there will be no surprises for consumers each year as the tariff rates for the “control period,” which in this case is three years, would be fixed at the beginning of the control period itself. The objective of this idea is to provide “tariff certainty”.
A senior KERC official said that MYT would especially help businesses and industries. “This will help them forecast their electricity expenditure for the next three years. Of course, there will be small changes, but the certainty will help,” the official said.
Framework based on forecasts for the control period
The new draft is a consolidation of the existing “Tariff Regulations” and “Terms and Conditions for Determination of Tariff for Transmission and Distribution and Retail Sale of Electricity Regulations.” It follows the “Model Regulation for Multi Year Distribution Tariff” finalised by the Forum of Regulators (FOR), which consists of the chairperson of the Central Electricity Regulatory Commission and chairpersons of the State electricity regulatory commissions, the draft document noted.
The MYT framework will be based on multi-year tariff petitions, determination of annual revenue requirement (ARR), tariff and other things and mechanisms for pass through (on to the consumers), and sharing of gains and losses (between the petitioner and consumers) due to uncontrollable and controllable factors respectively.
The MYT petition is expected to be filed before this November 30 , the draft says.
Why MYT now for retail supply?
Although the regulations for MYT have been present for over a decade, the application of it to retail supply (to consumers) had not been possible, owing to the dynamic power purchase costs and varying monsoon patterns. However, a recent notification by the Ministry of Power has given Discoms the power to levy fuel and power purchase costs adjustment (FPPCA) on consumers month-on-month. Thus, with 80-85% of the tariff comprising only energy costs, the MYT is easier to implement now, according to officials.
Among the many features of MYT is also a trajectory for transmission and distribution (T&D) losses. The MYT would have also forecast T&D losses for the control period at the beginning of it. If the losses exceed the forecast amount, then a penalty would be levied and if the losses are lesser, then an incentive would also be offered to the licencees.
The Escoms are collectively preparing their comments for the draft. “We will come to a consensus and send it to the Energy Department and then we will submit it to the KERC,” a senior official said.
However, consumers still have their doubts about how this framework will be beneficial to industries. “Where is the tariff certainty if they keep revising FPPCA every month? Tariff certainty is essential to industries especially when it comes to outside investments. In the present mode of tariff, this certainty is missing. This framework is also missing what it claims to provide,” said M.G. Prabhakar, former member of the advisory committee, Karnataka Electricity Regulatory Commission (KERC).
The draft has now been forwarded to all the stakeholders, including Escoms for comments. A public hearing is also scheduled on October 25 for the matter.
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