APERC Introduces New Procurement And Cost Control Regulations 2026 For Power Utilities In Andhra Pradesh

The Andhra Pradesh Electricity Regulatory Commission (APERC) has notified the Andhra Pradesh Electricity Regulatory Commission (Procurement, Investment and Cost Control) Regulations, 2026, introducing a comprehensive framework to regulate procurement, investment, and expenditure by electricity utilities in the state. The new regulations are intended to improve transparency, standardise procurement practices, and ensure cost efficiency across the power sector.

The regulations apply to all transmission and distribution licensees operating in Andhra Pradesh. They cover transmission projects with an estimated cost of more than ₹20 crore and distribution projects valued above ₹5 crore. According to the Commission, the framework has been introduced to ensure that utility spending remains transparent and that consumer interests are protected, as project and procurement costs directly influence electricity tariffs.

Before the introduction of these regulations, power utilities followed internal financial procedures, government procurement guidelines, board-approved policies, and investment approval norms that had been in place since 2006. However, APERC observed that there was no single regulatory mechanism to uniformly monitor procurement, investment decisions, and expenditure across all utilities. The Commission believes that a standardised framework will improve financial discipline and accountability.

A major feature of the new regulations is the emphasis on competitive procurement. Utilities must carry out purchases through open electronic tendering using a two-part bidding system that separately evaluates technical and financial proposals. The Commission has directed that qualification requirements, technical specifications, and eligibility criteria should remain objective and non-discriminatory, preventing preferential treatment, brand-specific conditions, or practices that could reduce competition.

The regulations also place strict limits on single-source procurement and direct nominations. Such methods will only be allowed under exceptional situations, including emergencies, disaster management, or urgent system restoration, and every such procurement will be subject to post-facto review by the Commission. In addition, utilities are prohibited from dividing projects into smaller packages to avoid financial approval limits or regulatory oversight.

To implement the framework, all licensees must submit their procurement policies, standard bidding documents, purchase manuals, and technical specifications to APERC for approval within three months of the regulations taking effect. They must also provide annual information on material prices, benchmark costs, and labour rates by December 31 each year. The Commission may compare these costs with market prices, national benchmarks, and similar utilities to ensure reasonableness.

The regulations also strengthen oversight through audits and inspections. APERC may appoint independent third-party agencies to examine the financial, technical, and quality aspects of projects. Importantly, only capital expenditure incurred under approved schemes and through compliant procurement processes will be considered while determining consumer tariffs. Any excessive, imprudent, or improperly procured expenditure, including unjustified delays and cost overruns, may be excluded from tariff calculations, making utility boards directly responsible for ensuring compliance with the new regulatory framework.