The Kerala State Electricity Regulatory Commission (KSERC) has ruled that intrastate power transmission projects costing above ₹2.5 billion (~$28.2 million) must be executed through the tariff-based competitive bidding (TBCB) route.

The order is linked to broader power sector reforms and fiscal conditions imposed by the Union Government.

Background

The decision follows amendments made to the Kerala State Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff) Regulations, 2021, which govern the control period from 2022 to 2027.

In 2023, these regulations were amended to incorporate specific provisions for the adoption of tariffs for intrastate transmission projects developed through the TBCB route. The amendment was necessitated by a Supreme Court judgment directing all state electricity regulatory commissions to frame regulations on tariff determination under Section 181 of the Electricity Act, 2003.

Subsequently, the Kerala government issued policy directions aligned with revised guidelines from the Union Ministry of Finance that allow states to borrow an additional 0.5% of their Gross State Domestic Product for the financial year 2025–26, subject to compliance with power-sector reforms.

One of the mandatory conditions was the prescription of a threshold for intrastate transmission projects to be implemented through the TBCB mechanism.

Kerala State Electricity Board (KSEB) proposed a threshold of ₹2.5 billion (~$28.2 million), which was examined and approved by the state government and sent to the Commission for consideration.

Commission’s Analysis

The Commission observed that prescribing a threshold for adopting the TBCB route for intrastate transmission projects is a matter of state policy involving public interest, particularly in the context of structural reforms in the power sector and access to fiscal incentives tied to additional borrowing.

The Commission referred to Regulation 62A of the KSERC (Terms and Conditions for Determination of Tariff) (First Amendment) Regulations, 2023, which explicitly permits the state government to notify such a threshold as a policy decision under Section 108 of the Electricity Act, 2003.

KSERC concluded that the policy direction issued by the Kerala government was consistent with the statutory provisions of the Electricity Act and the regulatory framework in force.

Approving the ₹2.5 billion (~$28.2 million) threshold, it directed that the selected transmission service providers must seek approval for the license and tariff from the Commission.

In October this year, KSERC upheld Kerala State Electricity Board’s levying fixed charges on domestic solar prosumers under net-metering arrangements.

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