Karnataka Electricity Regulatory Commission (KERC) has approved an additional surcharge of ₹1.40 /kWh (~$0.017) for consumers availing power through open access for the financial year (FY) 2023-24.

The Commission has brought down the additional surcharge for all open access consumers procuring electricity from renewable sources from ₹1.48 (~$0.018)/kWh to ₹0.70 (~$0.0084)/kWh.

The additional surcharge does not apply to captive consumption.

The additional surcharge already paid by open access consumers will be adjusted, and the difference will be paid to or received from the power distribution companies (DISCOMs).

Background

The Commission had initially imposed an additional surcharge of ₹1.48 (~$0.018)/kWh on all open access transactions in Karnataka, citing the need to compensate for stranded costs. However, this decision was challenged in Karnataka high court.

The court instructed the Commission to review the matter, considering data submitted by power distribution entities and providing an opportunity for stakeholders’ input.

While the matter was reconsidered, the court directed the open access consumers to continue paying the additional surcharge of ₹0.35 (~$0.0042)/ kWh under an interim order.

Following the court’s direction, KERC scheduled a hearing to reconsider the additional surcharge. It invited written submissions from power producers and distributors.

Several stakeholders raised concerns about the methodology used to calculate the additional surcharge, the impact on renewable energy consumers, and the need for a fair and transparent process.

They argued that the additional surcharge should align with national and state regulations, particularly considering the growing emphasis on promoting renewable energy. They emphasized that the additional surcharge should be imposed based on justifiable factors, such as actual stranded costs incurred by DISCOMs.

Stakeholders requested adjustments to the fixed charges already paid by open access consumers. They argued that the additional surcharge should not exceed 50% of wheeling charges and that the sudden increase could hinder the growth of renewable energy and affect industries.

They also raised concerns about the data DISCOMs provided, the pandemic’s impact on energy consumption patterns, and the need for a clear methodology in determining stranded costs. It was suggested that the additional surcharge calculation should consider short-term power purchases and load shedding.

Commission’s Analysis

The Commission had determined the additional surcharge of ₹1.48 (~$0.018)/kWh based on data provided by the Power Company of Karnataka, which included month-wise information on standard capacity, open access capacity, and average fixed costs. It compared stranded and open access capacities, determining the additional surcharge by considering the lower of the two capacities and calculating the stranded cost attributable to open access transactions.

However, after public hearings and stakeholder feedback, the Commission reconsidered the additional surcharge, addressing concerns about the availability of 15-minute block-wise data for open access consumption, and decided to compute it based on the fixed cost embedded in energy charges.

The total fixed cost was ₹311.46 billion (~$3.7 billion), of which ₹222.03 billion (~$2.7 billion) was recovered through demand charges, leaving a balance of ₹89.44 billion (~$1 billion) as fixed cost embedded in energy charges. Dividing this by the total energy sales by distribution companies resulted in an additional surcharge of ₹1.40 /kWh(~$0.017).

However, considering stakeholder requests, the Commission decided to continue concessions for consumers procuring power from renewable sources. For these consumers, the additional surcharge was reduced to ₹0.70 (~$0.0084) /kWh.

Karnataka remained the leading state for solar open access in the first quarter of 2023, accounting for over 34% of cumulative capacity as of June 2023, according to the Q2 2023 Mercom India Solar Open Access Market Report.

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