The Himachal Pradesh Electricity Regulatory Commission (HPERC) has set the rate for the sale of the state government’s free power to the Himachal Pradesh State Electricity Board (HPSEBL) at ₹2.73 (~$0.0292)/kWh for the financial year (FY) 2026–27, marking an increase from ₹2.70 (~$0.0289)/kWh in FY 2026 and ₹2.60 (~$0.0279)/kWh in FY 2025.

Himachal Pradesh is entitled to a share of electricity generated from hydroelectric projects located within the state as compensation for the use of its natural resources. This free power, typically around 12% of generation, comes from projects owned by central public sector undertakings such as NTPC, NHPC, and SJVN, as well as independent power producers and state entities.

In some cases, the share is higher, such as 20% from the Malana-I project, 16% from Chanju-I, and 15% from projects like Toss, while several small hydro projects also contribute an additional 1% toward the Local Area Development Fund.

The Commission calculated the rate by taking the higher of HPSEBL’s average power purchase cost and the ex-bus tariff of each generating station, and then deriving a weighted average based on the quantum of free power available.

For FY 2027, the average power purchase cost for FY 2026 was estimated at ₹2.66 (~$0.0285)/kWh, and this benchmark, along with station-specific tariffs or alternate values such as power purchase agreement rates or average pooled power purchase cost, was used to compute the final rate.

Based on this approach, the Commission estimated that HPSEBL would have access to approximately 548.23 million units of free power during the year, with a total notional cost of ₹1.49 billion (~$15.98 million). These calculations resulted in the approved rate of ₹2.73 (~$0.0292)/kWh.

In determining station-wise costs, the Commission relied on different benchmarks depending on data availability. For HPSEBL’s own generating stations, ex-bus tariffs determined by the Commission were used. For projects such as Ranjit Sagar Dam and Shanan, tariffs approved by the Punjab State Electricity Regulatory Commission were considered.

For private small hydro projects, approved power purchase agreement tariffs were used, and in cases where specific tariffs were unavailable, the Commission adopted an average pooled power purchase cost of ₹2.72 (~$0.0291)/kWh as a substitute.

Beyond tariff determination, the order contains a significant observation on the allocation of free power. HPSEBL informed the Commission that it is currently utilizing free power only from stations connected to its system and that free power from several other stations has not been made available by the state government.

The Commission expressed concern over this arrangement, stating that HPSEBL should have the first right to the state’s free power. It noted that consumers effectively bear the cost of this power because tariffs for hydro generators are determined after excluding the free power component.

As a result, restricting access to this power could mean that consumers are indirectly paying for it without receiving its benefits. The Commission urged the state government to review its approach and allocate the maximum possible quantum of free power to HPSEBL.

In June last year, Himachal Pradesh finalized its Resource Adequacy Framework Regulations to ensure that the state’s generating companies, distribution licensees, distribution companies and load dispatch centers contract sufficient electricity generation capacity to meet peak demand reliably, cost-effectively, and sustainably.

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