The Kerala State Electricity Regulatory Commission (KSERC) has approved multiple energy banking agreements entered into by the Kerala State Electricity Board (KSEB) to manage surplus power efficiently.

The Commission approved KSEB’s banking transaction with Punjab State Power Corporation (PSPCL) from May 24, 2024, to June 1, 2024, with the return of 105% of the banked power in April 2025.

It approved a second agreement with PSPCL through Arunachal Pradesh Power Corporation (APPCPL) from July 1, 2024, to July 31, 2024, with the return of 105.90% of banked power between April 1, 2025, and April 15, 2025.

KSERC also ratified another banking agreement between KSEB and Manikaran Power from August 1, 2024, to September 30, 2024, with 105% of the banked power returned from March 16, 2025, to May 31, 2025.

These agreements were made in response to fluctuating electricity demand. They aim to ensure optimal utilization of hydro resources while securing power supply for future peak demand periods.

Background

KSEB faced a complex challenge in 2024 due to highly fluctuating electricity demand. During the summer, consumption surged unprecedentedly, raising concerns about power availability. However, by May 2024, heavy rainfall caused a sharp decline in electricity usage across the state, leading to an unexpected power surplus, particularly from hydroelectric sources.

With reservoirs nearing full capacity before the monsoon season, KSEB needed an immediate solution to prevent water spillage while ensuring that surplus energy was not wasted. To tackle the issue, KSEB entered into strategic banking agreements with PSPCL, APPCPL, and Manikaran Power, allowing it to transfer excess electricity during periods of low demand in exchange for power during peak summer months in 2025.

KSEB justified these agreements by emphasizing the risks associated with excess reservoir storage. If hydroelectric reservoirs reached full capacity too early, there was a high likelihood of spillage, resulting in the loss of valuable hydro resources.

Additionally, market conditions at the time showed significantly high electricity prices during peak hours. By strategically banking surplus power, KSEB could mitigate financial losses while ensuring a stable and cost-effective energy supply when demand peaked again.

Commission’s Analysis

The Commission conducted a detailed evaluation of KSEB’s banking transactions, assessing their compliance with legal, financial, and operational considerations. It found that the agreements were fully aligned with regulatory provisions, particularly Section 86(1)(b) of the Electricity Act, 2003, which mandates prior approval for power procurement by distribution licensees. Regulation 78(3)(vi) of the KSERC Tariff Regulations, 2021, explicitly permits power banking as a viable procurement method.

A key factor in the Commission’s decision was the financial viability of these agreements. By choosing banking transactions over direct power purchases, KSEB avoided immediate cash outflows while securing energy for the months when demand would be significantly higher. This strategic move enabled KSEB to manage its financial resources efficiently while ensuring an uninterrupted power supply for consumers.

The Commission also examined the impact of these agreements on grid stability. The structured distribution of surplus power ensured that Kerala’s electricity grid remained stable while preventing adverse effects on transmission systems. Given the high market prices for electricity during peak hours, the return of banked power in April and May 2025 would provide KSEB with a crucial energy supply when demand was expected to surge.

After assessing all these factors, the Commission ratified and approved KSEB’s banking transactions, recognizing them as essential measures for efficient power management. It further directed KSEB to ensure the banked power was returned according to the agreed terms.

In August last year, the Ministry of Power clarified that energy obtained through open access arrangements, either through a third-party supplier or captive generation, will not constitute a part of the permissible capacity of banked energy.

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