Karnataka Electricity Regulatory Commission Addresses Additional Surcharge Controversy For Green Energy Open Access

In response to a series of legal actions and public hearings, the Karnataka Electricity Regulatory Commission (KERC) has revisited its decision regarding the Additional Surcharge (ASC) imposed on open access transactions in the state. The journey of this issue dates back to the Hon’ble Appellate Tribunal’s orders in 2022, which directed the demonstration of factors like stranded costs to justify the levy of ASC. In compliance with this directive, the KERC had initially determined an ASC of ₹1.48 per unit for all open access transactions in Karnataka through its Tariff Orders in May 2023.

However, the decision faced legal challenges, with Soham Renewable Energy India Private Limited and others filing a petition before the Hon’ble High Court of Karnataka. The court, in its wisdom, set aside the order related to the imposition of an additional surcharge. Subsequently, similar orders were passed in connected petitions, creating a cascade effect of legal scrutiny on the matter.

In response to these legal developments, the KERC scheduled a hearing on August 18, 2023, to reevaluate the Additional Surcharge. The Commission issued public notices, published in prominent newspapers, and individually notified relevant stakeholders, including petitioners, Power Company of Karnataka Limited (PCKL), and state distribution licensees. The hearing aimed to address concerns and gather insights from various stakeholders.

Stakeholders submitted written submissions, emphasizing key points related to the Electricity Act of 2003 and the Tariff Policy of 2016. They argued that the Additional Surcharge should align with the fixed charges determined by the Commission in the retail supply tariff, and they cited Central Government Rules of 2022, stating that the surcharge need not be collected from green energy open access consumers paying fixed charges. The stakeholders also raised concerns about the impact of increased ASC on industrial growth, potential environmental consequences, and the methodology employed for determining the surcharge.

The Commission, during its hearing, grappled with the absence of 15-minute blockwise data for all open-access transactions and sought alternative approaches to determine the stranded cost. Some stakeholders suggested considering the fixed cost embedded in energy charges for the calculation, while others argued against this approach. In the absence of a standardized 15-minute data set, the Commission opted for a method that considered the entire fixed cost embedded in the energy charges, resulting in an ASC of ₹1.40 per unit for FY24.

However, recognizing the growing integration of renewable energy sources, the Commission decided to grant a 50% concession in ASC for open-access consumers procuring power from renewable sources, settling at 70 paise per unit for this category. The ASC will not apply to captive consumption, and adjustments will be made for the amount already paid by open-access consumers.

The decision aims to strike a balance between the need to recover fixed costs and the evolving landscape of renewable energy integration. The KERC acknowledges the complexities of the energy market and the need for a phased approach to concessions, aligning with the broader national and state regulatory frameworks. As the Commission concludes its deliberations, stakeholders await the implementation of the revised ASC structure and consider its implications for the future of open-access transactions in Karnataka. The nuanced decision reflects the ongoing challenges in adapting regulatory measures to the dynamic energy landscape, emphasizing the need for collaborative efforts between regulatory bodies, industry players, and environmental considerations.

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