APERC closes fourth control period, but fiscal risks rise

The Andhra Pradesh Electricity Regulatory Commission (APERC) has formally closed the Fourth Control Period (FY 2019-20 to FY 2023-24) through a set of major orders issued in late 2025.

In transmission, APTRANSCO’s request for a Rs 1,059.75 crore true-down, comprising a claimed surplus of Rs 902.94 crore plus Rs 156.81 crore due to a methodological difference in depreciation calculation, was largely pared back after a detailed item-wise analysis against the approved Multi-Year Tariff Order and audited accounts. The Commission approved only Rs 148.20 crore as the net aggregate gain for the period. It disallowed Rs 449.67 crore of Operation and Maintenance expenses that exceeded normative levels, though it permitted the actual pension trust deposits of Rs 1,472.27 crore, recognising pension liabilities as uncontrollable. The Return on Capital Employed was reduced by Rs 1,805.13 crore from the MYT projection due to lower asset additions and revised cost of debt calculations. After adjusting for prior period orders, the final surplus to be passed to DISCOMs was fixed at Rs 134.08 crores, proportionate to their energy drawals during the control period.

For distribution, the three DISCOMs (APSPDCL, APCPDCL, APEPDCL) collectively sought Rs 14,207.52 crore, including Rs 10,057.82 crore in true-up claims and Rs 4,149.70 crore as carrying cost. APERC approved a consolidated true-up of Rs 4,497.89 crore and denied the carrying cost entirely, stating that the extant regulations only permit carrying cost on uncontrollable items at the Commission’s discretion and that significant outstanding pension and generator dues exceeded eligible variations. The Commission also disallowed specific expense claims, including Rs 3,675.11 crore claimed by APEPDCL for interest on short-term operational loans, Rs 212.18 crore for bad and doubtful debts, and Rs 19.21 crore for billing discounting charges claimed by APSPDCL, as these were not approved in the relevant Retail Supply Tariff Orders. Based on a written undertaking from the state government dated 31 December 2025, the Commission directed DISCOMs to recover the approved amounts from the Government of Andhra Pradesh.

In a related distribution business true-up order, the Commission determined final adjustments to the Aggregate Revenue Requirement, resulting in a net true-up of Rs 1,201.18 crore for APSPDCL and true-downs of Rs 867.50 crore for APCPDCL and Rs 2,144.50 crore for APEPDCL. After accounting for provisional adjustments already made, a net true-down of Rs 610.82 crore across all DISCOMs is to be reflected in the Retail Supply Tariff for FY 2026-27.

In the generation, the Commission scrutinised Hinduja National Power Corporation Limited’s (HNPCL) claims of about Rs 130 crore for additional capital expenditure during the tariff determination for the 5th Control Period. It rejected a claim of Rs 30.03 crore for a pre-filtration water system, holding it a foreseeable operational upgrade in a cyclone-prone coastal area rather than a permissible capital addition. A second claim of Rs 99.99 crore for repairs to the seawater intake pipeline was also rejected, characterised as routine maintenance arising from operational neglect. The Commission set the project’s capital cost at Rs 5,810.75 crore as per a prior order, approved a base variable charge of Rs 3.33 per kWh, and allowed HNPCL to file separately for fly ash disposal cost recovery as a potential “change in law.”

Government intervention shields consumers, but raises sustainability questions

A key feature of the 4th Control Period closure is the state’s decision to pay the approved DISCOM true-up of Rs 4,497.89 crore to avoid tariff escalation. This protects consumers in the short term and aligns with tariff stability commitments.

However, the financial context has changed sharply. DISCOMs are now projecting a Rs 15,652 crore revenue gap for FY 2026-27, as outlined in their recent Aggregate Revenue Requirement filings. APSPDCL seeks Rs 7,733.85 crore, APEPDCL Rs 4,452.73 crore, and APCPDCL Rs 3,465.35 crore. Officials cite rising power procurement costs, fuel price fluctuations, increased renewable purchase commitments, and growing energy demand as primary drivers. Continued reliance on state funding raises questions about fiscal capacity, regulatory predictability, and the incentive structure for operational efficiency.

The real challenge now lies ahead

The upcoming FY 2026-27 Aggregate Revenue Requirement proceedings will be the real test. APERC has already indicated that final Fourth Control Period adjustments will reflect in the next retail tariff cycle. With procurement costs rising and compliance burdens increasing, the Commission faces three constrained choices: drive deeper efficiency, allow tariff revisions, or rely on continued state financial support.

Its recent approach suggests a stronger leaning toward stricter performance-based discipline. In the transmission and distribution orders, the Commission consistently disallowed non-normative expenditures, limited expenses to MYT-approved norms, rejected carrying costs, and emphasised adherence to regulatory methodology. How that aligns with political promises and sector realities will define Andhra Pradesh’s power sector in the coming period.

The featured photograph is for representation only.