The Karnataka Electricity Regulatory Commission (KERC) recently levied 25 percent of the normal transmission charges as wheeling charges for open access consumers in the state.

The current wheeling charges being levied are five times more than the charges imposed in the state earlier. According to the KERC order passed in 2014, just five percent of the transmission charges were levied as wheeling charges in the state of Karnataka.

This decision to increase the wheeling charges in the state comes at a time when various states in the country are either reducing or nullifying it.

When contacted, a KERC official told Mercom “Yes, the wheeling charges have been increased. With the cost of wind and solar power reducing drastically, renewable energy sources can now compete with the conventional sources of energy. There was a need to increase the applicable charges, because for the past 10 years in Karnataka, the wheeling and banking charges have remained constant. In 2008, KERC had issued wheeling and banking charges and in the 2014 KERC order, the status of charges was maintained at the same level as 2008.”

The KERC official also said that most of the renewable energy rich states have moved from concessional charges to normal wheeling and banking charges. “We (KERC) have not increased banking charges. The banking charges at 2 percent in kind of the injected energy (which means no cash is paid to KERC, instead the company will inject the quantum of electricity to the grid, free of charge) will continue,” added the KERC official.

When asked how this will affect the pace of solar projects in the state, the KERC official said, “Earlier, for solar there were no banking or wheeling charge in Karnataka. Per our (KERC) previous order, all the solar power generators in the state achieving commercial operation dated between April 1, 2013 and March 31, 2018, and selling power to consumers within the state on open access or wheeling are exempted from payment of wheeling and banking charges and cross subsidy surcharge for a period of 10 years from the date of commissioning. Therefore, the wheeling charge (25 percent of transmission charges) and banking charge (2 percent) will now apply.”

The KERC official also said that even captive solar projects commissioned during the above-mentioned (April 2013 to March 2018) period were exempt from wheeling and banking charges, but now they will have to pay charges specified for captive consumption projects.

“Open access has had a good run in Karnataka and now we are seeing a pullback in subsidies. This was bound to happen considering solar is touted as cheaper than coal. Government agencies are not going to lose revenue opportunities and if one state announces such measures, other states tend to follow,” said Raj Prabhu, CEO of Mercom Capital Group.

In 2013, the applicable wheeling charges for high tension (HT) networks were 9.85 paise/unit and for low tension (LT) networks was 22.99 paise/unit.

KERC’s move follows a similar announcement made in December by regulators in Madhya Pradesh. In December 2017, the Madhya Pradesh Electricity Regulatory Commission (MPERC) had announced that wheeling charges, a cross subsidy surcharge, and an additional surcharge on the wheeling charges as decided by MPERC would be applicable to renewable energy generation from time to time.