The Karnataka Electricity Regulatory Commission (KERC) has approved Bangalore Electricity Supply Company’s (BESCOM) plea to allow it to impose an additional surcharge of ₹0.4(~$0.004)/kWh on open access consumers.

The additional surcharge will apply from March 2026 until the Commission issues the surcharge for the next financial year (FY) 2027.

The additional surcharge is, however, lower than ₹0.82 (~$0.009)/kWh that was in force for FY 2026.

The Commission clarified that the additional surcharge will not apply to the energy drawn for captive consumption.

Background

BESCOM, on behalf of all distribution companies (DISCOM) in Karnataka, approached the Commission to approve an additional surcharge of ₹0.58 (~$~$0.006)/kWh.

It contended that DISCOMs had tied up a considerable quantum of power to meet the growing power demand. It said open-access consumers were procuring a significant share of power, leading to stranded capacity for DISCOMs.

It argued that based on the power purchase agreements signed with power generators, the DISCOMs have to pay fixed charges irrespective of power utilization. It also added that the burden of fixed costs is affecting the consumers.

The petitioner said the gross stranded capacity was 1033.46 MW and the gross stranded fixed cost of power was ₹10.28 billion (~$113.40 million).

After deducting the portion of fixed cost already recovered from OA consumers through demand charges, BESCOM’s net stranded cost recoverable stood at ₹3.61 billion (~$39.81 million)

In FY 2025, 6,247.82 million units of energy were procured through the open access route, resulting in an additional surcharge of ₹0.58 (~$ 0.006)/kWh after deducting demand charges.

BESCOM requested the Commission to approve an additional surcharge of ₹0.58 (~$0.006)/kWh for FY 2026 with effect from April 1, 2025.

However, open access developers raised objections to BESCOM’s proposal, arguing that imposing an additional surcharge would make the third-party model unviable in the state.

They said imposing an additional tax would discourage investment in renewable energy projects. They also said the additional surcharge must be based on the actual stranded fixed costs arising from consumers migrating to open access.

However, BESCOM argued that third-party open-access renewable energy projects would be profitable even after paying various charges.

It contended that renewable energy generators supply power to high-paying high-tension consumers and, on commercial considerations, while DISCOMs have to cater to the entire consumer base.

The DISCOM told the Commission that it was facing difficulties in securing short- and long-term finance due to elevated credit risk, delayed subsidy payments, rising debtors, and a decrease in high-paying consumers.

Commission’s Analysis

The Commission said that while the Electricity Act, Electricity Policy, and Tariff Policy conclusively provide for the imposition of an additional surcharge, the DISCOM must demonstrate that its obligations have been and continue to be stranded.

It added that the levy of an additional surcharge is statutory for open access consumers, enabling DISCOMs to recover fixed costs associated with stranded power.

After taking note of the petitioner’s submissions, the Commission allowed BESCOM to levy an additional surcharge from March 2026 and denied BESCOM’s petition to seek a retrospective surcharge.

The Commission said that BESCOM had a net stranded cost of ₹3.61 billion (~$39.81 million) in the previous year, which, if not recovered from open access consumers, would have to be borne by consumers at large.

It also noted BESCOM’s delay in filing a petition to levy an additional surcharge on open access consumers and stated that it was not possible to recover the entire stranded cost for that year.

After taking note of BESCOM’s calculations for arriving at the additional surcharge, it calculated the stranded capacity at 1,033.46 MW and the transmission charges of ₹83.18 billion (~$917.18 million).

It also approved a net stranded cost of ₹2.48 billion (~$27.34 million) compared to ₹3.61 billion (~$39.81 million) sought by BESCOM.

However, the Commission approved the cost per MW at ₹8.8 million (~$97,034)/MW as opposed to the ₹9.9 million (~$109,160)/MW sought by BESCOM.

It also revised the actual energy scheduled to 75,636.21 million units as compared to 75,758 MU submitted by BESCOM.

KERC approved an additional surcharge of ₹0.4 (~$0.004)/kWh for FY 2026 and directed the DISCOM to file a petition to revise the additional surcharge for the next financial year from July 1, 2026.

 

It also highlighted that the additional surcharge will not apply to the supply of energy through open access from non-fossil fuel-based waste-to-energy plants.

Last year, the Karnataka High Court struck down the Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022, along with the KERC (Terms and Conditions for Green Energy Open Access) Regulations, 2022.

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