APERC Draft 2026 Rules Introduce Strict Procurement And Cost Control Framework For Power Utilities In Andhra Pradesh

The Andhra Pradesh Electricity Regulatory Commission (APERC) has released a draft regulation aimed at improving transparency, accountability, and cost control in power procurement and infrastructure development across the state. The proposed framework, titled the “Andhra Pradesh Electricity Regulatory Commission (Procurement, Investment and Cost Control) Regulations, 2026,” seeks to create a uniform procurement system for transmission and distribution utilities while safeguarding consumer interests from unnecessary tariff burdens.

The regulation will apply to the Transmission Licensee and all Distribution Licensees operating in Andhra Pradesh. It will govern transmission projects valued above Rs. 20 Crores and distribution schemes exceeding Rs. 5 Crores. The framework will come into force once it is officially published in the Andhra Pradesh Gazette.

Under the draft rules, all utility licensees must submit important baseline documents to APERC within three months of the commencement of the regulation. These include Procurement Policies, Purchase Manuals, Standard Technical and Material Specifications, and Standard Bidding Documents. Distribution companies will also be allowed to jointly prepare common procurement manuals and bidding formats to ensure uniformity and ease of implementation.

A key focus of the proposed regulation is preventing unfair procurement practices and ensuring open competition in tendering processes. APERC has proposed that procurement should generally be carried out through electronic tendering using an open competitive two-part bidding system, where technical and financial bids are evaluated separately. The Commission has also moved to discourage practices such as cartelisation, collusive bidding, and artificial splitting of contracts to bypass higher approval requirements.

According to the draft, single tenders, limited tenders, and proprietary purchases will only be allowed in exceptional cases. Utilities will be required to provide written justifications for such procurements, which will remain subject to detailed regulatory scrutiny.

The Commission has also placed strong emphasis on cost benchmarking and lifecycle cost optimization. Utilities must submit annual cost data, including expected material prices and labour rates for the upcoming financial year, by December 31 every year for APERC’s review and approval. This step is expected to help standardize costs and prevent excessive expenditure.

To improve transparency, utilities will have to publish tender notices, bid results, contract awards, and standardized schedules of rates on their official websites and e-procurement portals. APERC has also introduced strict guidelines for inventory and contract management to reduce the accumulation of excess or slow-moving materials.

The regulation further grants the Commission authority to conduct independent financial, technical, or procurement audits through third-party agencies whenever required. Through a “Prudence Check” mechanism, APERC can partially or fully disallow expenditure recovery if costs are found to be excessive, non-competitive, or improperly procured.

Only assets created under approved investment schemes and procurement frameworks will qualify for capitalization and tariff recovery. The draft regulation also makes the utility Boards of Directors directly responsible for ensuring compliance with all provisions.