UPERC issues key orders on tariffs, procurement, and grid projects

The Uttar Pradesh Electricity Regulatory Commission (UPERC) has issued a series of orders finalising the financial framework for the state’s power sector, maintaining consumer electricity tariffs for the sixth consecutive year while approving significant investments in renewable energy and transmission infrastructure.

The decisions, made across multiple petitions this month, provide a clear direction for the 2025-26 financial year, emphasising cost absorption by utilities, a push for greener power, and the resolution of ongoing operational disputes.

No Change in Electricity Tariffs for 2025-26 

In its detailed order on the Aggregate Revenue Requirement (ARR) for the state’s five distribution companies, UPERC has decided against any tariff increase for the 2025-26 financial year. This marks the sixth consecutive year that electricity rates have remained frozen for all consumer categories, including domestic, commercial, and industrial users.

The decision comes despite discoms projecting a revenue gap of over Rs 7,710 crore. The Commission justified its stance by pointing to an accumulated regulatory surplus of more than Rs 18,592 crore carried forward from previous years. It held that this surplus is sufficient to absorb the projected shortfall, shielding consumers from a tariff hike.

However, the order underscores persistent challenges. The Commission noted that the cost of supply, estimated at Rs 8.18 per unit, remains higher than the approved average billing rate of Rs 7.61 per unit. To address this underlying inefficiency, UPERC has mandated aggressive loss reduction targets. System-wide distribution losses, currently at 13.78% for 2024-25, are expected to fall to 10.74% by the end of the 2029-30 control period, with individual targets assigned to each discom.

The order also introduced revisions to the Green Energy Tariff. The rate for high-voltage consumers has been slightly reduced from 36 paise to 34 paise per unit, while a new rate of 17 paise per unit has been established for low-voltage consumers opting for green power. The tariff schedule includes conditions such as maintaining a minimum power factor of 0.90, with penalties for non-compliance. The total ARR for the five discoms was approved at Rs 86,183.29 crore to ensure adequate resources for system operation.

Commission Clears 300 MW Hybrid Project, 82.6 MW of Solar PPAs

Aligning with national renewable purchase obligation (RPO) targets, UPERC has approved several green energy initiatives. The Commission approved the Power Sale Agreement (PSA) between Uttar Pradesh Power Corporation Limited (UPPCL) and NHPC Limited for 300 MW of wind-solar hybrid power.

NHPC, acting as an intermediary, sourced the power through a competitive bidding process, with Energizent Power Private Limited winning the 300 MW capacity at a tariff of Rs 3.49 per kWh. With NHPC’s trading margin of 7 paise, the effective tariff for UPPCL will be Rs 3.56 per kWh. The power will be supplied from a project comprising a 250 MW solar component in Rajasthan and a 104 MW wind component in Andhra Pradesh, with a declared annual capacity utilisation factor of 37.60%. UPPCL stated this procurement is critical to meet its target of contracting about 23,500 MW of renewable capacity by FY 2027-28.

Separately, UPERC approved 25 Power Purchase Agreements (PPAs) totalling 82.6 MW of solar capacity under the ‘Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan’ (PM-KUSUM) program. The tariffs for these projects, which will solarize agriculture feeders, range from Rs 2.87 to Rs 2.99 per kWh. The approved developers include GP Eco Solutions India and Shri Mahavir Ferro Alloys Private Limited, with projects located in districts like Badaun, Hathras, and Mathura.

Rs 186.65 Crore Approved for Five Critical Transmission Schemes

To bolster grid reliability and meet future load growth, UPERC has approved five transmission schemes proposed by the Uttar Pradesh Power Transmission Corporation Limited (UPPTCL) with a combined estimated cost of Rs 186.65 crore.

The approved projects are:

1. Augmentation of 220/132/33 kV Sector 129 substation, Gautam Buddha Nagar: Replacing transformers to raise capacity (Cost: Rs 22.03 Cr).
2. Augmentation of 400/220/132 kV Jehta substation, Lucknow: Adding a third 500 MVA transformer to support demand, including a proposed textile park (Cost: Rs 65.71 Cr).
3. Augmentation of 400/220 kV Muradnagar II substation, Ghaziabad: Replacing a permanently damaged, decades-old transformer to restore N-1 reliability (Cost: Rs 30.61 Cr).
4. Augmentation of 400/220 kV GIS Bhaukhari substation, Basti: Increasing capacity to meet future demand (Cost: Rs 45.08 Cr).
5. Construction of 132 kV Mallawan-Bangarmau line, Unnao: Providing an additional power source to reduce network overloading (Cost: Rs 23.22 Cr).

The Commission conducted a prudence check, noting the computed Internal Rate of Return for these schemes ranged from 17.03% to 38.99%, well above the benchmark cost of debt.

Smart Prepaid Meter Rollout for New Consumers Faces Hurdles

A conflict has emerged between UPPCL and the regulator over the installation of smart prepaid meters for new electricity connections. UPPCL, citing a 2019-20 Union Power Ministry directive, has been making these meters compulsory for new users since September 2024, charging Rs 6,016 per connection and collecting over Rs 106 crore from 1.77 lakh applicants.

However, UPERC issued a notice clarifying that meters procured under the central Revamped Distribution Sector Scheme (RDSS) are intended only for replacing existing meters, not for new consumers. It directed UPPCL to procure separate meters for new connections and submit cost details. Despite this, UPPCL continued the practice, with its Chairman stating the existing tender covers both purposes. UPERC has since clarified that new consumers can choose either a smart prepaid or a smart postpaid meter until pending High Court Public Interest Litigations on the compulsory nature of prepaid meters are settled.

1,500 MW Thermal Power Procurement Paused Over Cost Concerns

In a separate proceeding, UPERC has withheld approval for UPPCL’s petition to procure 1,500 MW of power from thermal plants to be developed by Adani Power Limited under the DBFOO model. The Commission raised serious concerns about the cost structure presented by UPPCL.

A key issue is the inclusion of costs for a Flue Gas Desulphurisation (FGD) plant in the tariff, despite the Government of India having withdrawn the mandate for its installation. The Commission estimated that this inflates the per-unit cost by 55-75 paise. It also questioned UPPCL’s failure to factor in reduced GST rates on coal, which should lower energy charges.

The regulator directed UPPCL to formally make Adani Power a party to the petition and submit a revised proposal that accurately reflects these lower costs. The Commission also noted that UPPCL had not provided its own assessment of the developer’s submissions. The case has been adjourned to December 18, 2025, pending UPPCL’s detailed response.

Conclusion

This month’s regulatory actions establish key parameters for Uttar Pradesh’s power sector. While tariff stability is a clear outcome for consumers, UPERC is simultaneously steering the sector towards greater efficiency through strict performance mandates, approving strategic investments in renewable energy, and reinforcing the transmission network, all while adjudicating on complex implementation issues.

The featured photograph is for representation only.