The Madhya Pradesh Electricity Regulatory Commission (MPERC) has notified the draft Multi-Year Tariff (MYT) Distribution Regulations, 2026, proposing a new regulatory framework for electricity distribution, wheeling, and retail supply in the state. The draft regulations will apply to all existing and future distribution licensees for a five-year control period from April 1, 2027, to March 31, 2032.
The proposed framework will replace the existing MYT Distribution Regulations, 2021, which will remain effective until March 31, 2027. The regulations have been prepared under the Electricity Act, 2003, with the objective of improving efficiency, maintaining financial discipline, promoting competition and protecting consumer interests through a predictable tariff-setting process.
Under the draft rules, distribution licensees will have to submit their Aggregate Revenue Requirement (ARR) for the complete five-year control period along with their tariff proposals for financial year 2027-28 by November 30, 2026. Licensees will also be required to submit annual true-up petitions every November based on audited financial accounts. These filings will help reconcile actual revenues and expenses with the approved projections.
The draft regulations also focus on prudent capital expenditure. Only investments considered prudent and aligned with the state’s approved capital expenditure guidelines will be allowed for recovery through tariffs. Capital projects will follow a normative debt-equity ratio of 70:30, while the base Return on Equity (RoE) will remain at 15%.
Additional incentives have been proposed for efficient implementation of approved expenditure. A distribution licensee can earn an additional 0.50% RoE if it achieves more than 95% of its approved capital works. Another 0.50% additional RoE may be available for utilizing more than 95% of the approved repair and maintenance budget.
The regulations also propose specific targets for reducing Aggregate Technical and Commercial (AT&C) losses and distribution losses across Madhya Pradesh’s East, West and Central DISCOMs and other designated industrial areas. Variations in operation and maintenance expenses and deviations from prescribed AT&C loss targets will be shared between utilities and consumers in a 1:2 ratio. This means two-thirds of such gains or losses will be passed on to consumers.
Costs arising from uncontrollable factors, including changes in law, force majeure events, changes in sales volumes and statutory duties, will be allowed for direct pass-through through tariffs.
MPERC has retained the automatic monthly Fuel and Power Purchase Adjustment Surcharge (FPPAS) mechanism to enable faster recovery of changes in power procurement costs. Distribution licensees can adjust monthly variations without obtaining prior approval, subject to annual true-up. If FPPAS exceeds 5%, the additional amount, up to 20%, can be carried forward for two months to limit sudden tariff increases.
The draft also strengthens consumer protection. Distribution licensees charging rates above MPERC-approved tariffs may face action under Section 142 of the Electricity Act. They will also have to refund excess collections with interest linked to the Reserve Bank of India’s bank rate.
The regulations further provide methodologies for allocating wheeling and retail supply costs, calculating depreciation, working capital and bad debt provisions. MPERC will invite comments and objections from stakeholders and the public before finalizing the regulations and tariff framework for the 2027-32 control period.
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