KERC concludes FY25 APR cycle with mixed true up outcomes across all licensees

The Karnataka Electricity Regulatory Commission (KERC) has concluded its Annual Performance Review (APR) for FY2024-25 across all electricity licensees in the state through a batch of orders dated April 17, 2026. The orders cover five electricity supply companies BESCOM, HESCOM, GESCOM, CESC, and MESCOM, along with the state transmission utility KPTCL, cooperative licensee HRECS, and two deemed distribution licensees operating within Special Economic Zones, Mangalore SEZ Limited (MSEZL) and AEQUS SEZ Private Limited. The outcomes are mixed, with BESCOM and CESC facing revenue deficits to be recovered from consumers, while HESCOM, GESCOM, MESCOM, KPTCL, HRECS, MSEZL, and AEQUS SEZ will issue refunds. Adjustments will appear as “FY25 True up Charges” in bills from May 2026, spread across equal monthly instalments through FY2026-27.

ESCOMs: Deficits for BESCOM and CESC, refunds for the rest

Among the five distribution companies, BESCOM recorded the largest deficit at Rs 2,068.38 crore, translating to a consumer recovery of 56 paise per unit. BESCOM had petitioned for Rs 2,802.80 crore, approximately 80 paise per unit, but KERC’s prudence checks reduced the approved Aggregate Revenue Requirement (ARR) to Rs 34,087.94 crore against actual revenue of Rs 32,019.56 crore. CESC (Mysuru) reported a deficit of Rs 121.71 crore, to be recovered at 15 paise per unit.

On the surplus side, HESCOM and GESCOM will refund 10 paise per unit each, and MESCOM will refund 9 paise per unit, with surpluses of Rs 153.46 crore, Rs 90.42 crore, and Rs 63.32 crore respectively.

A key feature across the ESCOM orders is the disallowance of Return on Equity (RoE). BESCOM, HESCOM, GESCOM, and CESC reported negative net worth as of April 1, 2024, Rs 6,442.59 crore, Rs 7,680.89 crore, Rs 3,125.50 crore, and Rs 1,922.74 crore respectively, leading KERC to disallow their RoE claims under the KERC Tariff Regulations, 2006. MESCOM, which reported a positive net worth of Rs 850.49 crore and a compliant debt equity ratio, received an approved RoE of Rs 133.91 crore.

On distribution losses, CESC recorded 8.76% against an approved range of 9.50% to 10%, earning an incentive of Rs 14.68 crore. BESCOM achieved 8.51% against a lower limit of 9.25%, earning Rs 113.96 crore. GESCOM and HESCOM missed their targets and were penalised. MESCOM’s loss level of 8.39% was accepted after KERC corrected its computation by excluding supply to Mangalore SEZ.

BESCOM also reported higher irrigation pump set consumption at 9,235.31 million units against an approved 7,815.46 million units, which KERC attributed to deficit rainfall and increased groundwater extraction. For Renewable Purchase Obligation (RPO), KERC allowed BESCOM to adjust power procured between April and June 2025 against the FY25 shortfall and accepted compliance after applying a 10% penalty on distributed renewable energy shortfall.

KERC flagged imprudent capital expenditure across all five utilities and stated that assets classified as imprudent for more than two years may face disallowance of depreciation and interest for their entire asset life in future tariff orders. On Aadhaar linkage of irrigation pump set connections, CESC stood at 98.17% and MESCOM exceeded 99.5%. KERC directed all licensees to complete the exercise within three months, linking subsidy release to compliance.

During public consultations, industry bodies including KASSIA, FKCCI, and KCCI raised concerns over high industrial tariffs and cross subsidy burdens. ESCOMs cited measures such as the Discounted Energy Rate Scheme and recent tariff reductions for HT consumers. The true up charges will apply across all consumer categories except those billed under the Discounted Energy Rate Scheme.

Consumers will also continue to bear a pension and gratuity surcharge of 36 paise per unit for FY2026-27, reducing to 35 paise in FY28 and 34 paise in FY29, applied alongside the true up adjustment. All five utilities have been directed to maintain separate account heads for true up adjustments to ensure transparent recovery or disbursement.

KPTCL: Rs 327.21 crore surplus to be refunded to ESCOMs

The Karnataka Power Transmission Corporation Limited (KPTCL) recorded a revenue surplus of Rs 327.21 crore for FY2024-25. KERC has directed the State Transmission Utility to refund the surplus to ESCOMs in FY2026-27, to be adjusted against transmission charge arrears as of March 31, 2025, with any remaining balance settled in April 2026 bills.

KPTCL had reported a surplus of Rs 71.78 crore in its true up petition filed on November 29, 2025. Following prudence checks, KERC revised this figure, approving a net ARR of Rs 6,248.62 crore against revenue of Rs 6,575.83 crore. The refund will be distributed across ESCOMs in proportion to their transmission capacity allocation under Tariff Order 2024, BESCOM will receive Rs 166.95 crore, HESCOM Rs 68.15 crore, GESCOM Rs 36.40 crore, CESC Rs 32.44 crore, and MESCOM Rs 23.27 crore.

KERC imposed a penalty of Rs 5.53 crore for failure to meet the transmission loss target. KPTCL reported losses of 2.953%, exceeding the approved range of 2.614% to 2.714%. At the same time, KERC approved an incentive of Rs 55.79 crore for achieving transmission system availability of 99.84% against a normative level of 98%, capped at 99.75% under regulations. This incentive will be shared equally between KPTCL and ESCOMs, with KPTCL directed to use its share for technology adoption and staff training.

On cost components, operation and maintenance expenses were approved at Rs 2,543.91 crore. RoE was approved at Rs 1,157.17 crore against a claim of Rs 1,266.46 crore. Interest on working capital was approved at Rs 160.89 crore, while income tax was limited to Rs 244.98 crore, restricted to tax on allowable return against a claim of Rs 380.44 crore.

Capital expenditure remained a key area of scrutiny. KPTCL incurred capex of Rs 4,296.23 crore, more than double the approved Rs 2,000 crore. KERC accepted the expenditure after prudence checks, citing requirements for renewable energy evacuation and N 1 reliability standards. However, Rs 7.29 crore was disallowed for works classified as imprudent and attributable to KPTCL and ESCOMs.

The Commission also recognised a revenue deficit of Rs 5.59 crore for the State Load Despatch Centre, which will be recovered from ESCOMs in proportion to transmission capacity allocation. KERC directed KPTCL to strengthen safety measures in response to an increase in electrical accidents and to expedite implementation of the KERC Intra State Deviation Settlement Mechanism and Related Matters Regulations, 2025.

HRECS: Rs 59.31 crore surplus, highest per unit refund rate

The Hukeri Rural Electric Co operative Society Limited (HRECS) recorded a revenue surplus of Rs 59.31 crore for FY2024-25. KERC directed the licensee to refund the surplus at 155 paise per unit, the highest per unit refund rate across all licensees in this APR cycle, through equal monthly instalments starting from meter readings on or after May 1, 2026.

HRECS had projected a revenue deficit of Rs 6.83 crore. Following prudence review, KERC approved a net ARR of Rs 267.35 crore against actual revenue of Rs 326.66 crore. Power purchase cost was approved at Rs 253.13 crore for 443.41 million units, and KERC directed HESCOM to refund Rs 19.84 crore to HRECS due to differences in power purchase cost calculations at the generation bus. Operation and maintenance expenses were approved at Rs 21.78 crore against a claim of Rs 24.14 crore.

KERC imposed a penalty of Rs 0.91 crore for failure to meet the distribution loss target. HRECS reported losses of 14.06%, exceeding the approved range of 13.25% to 13.75%.

A significant regulatory intervention concerns a claim of Rs 40.37 crore under extraordinary items linked to the write off of old subsidy dues. KERC disallowed the claim in full and separately addressed the state government on the issue, cautioning against actions that weaken the financial position of the licensee and affect consumer tariffs. This disallowance was a primary contributor to the surplus outcome.

On compliance, KERC noted Aadhaar linkage of irrigation pump set connections at 98.44% and directed completion within three months, linking subsidy release to full compliance. The Commission also directed HRECS to implement an automated compensation mechanism under Standards of Performance and to submit quarterly progress reports.

SEZ licensees: MSEZL and AEQUS SEZ to refund consumers

KERC approved revenue surpluses for both deemed distribution licensees operating in Special Economic Zones. Mangalore SEZ Limited (MSEZL) recorded a surplus of Rs 6.86 crore, to be refunded at 77 paise per unit. AEQUS SEZ Private Limited recorded a surplus of Rs 0.78 crore, to be refunded at 24 paise per unit. Both licensees have been directed to refund through equal monthly instalments starting from meter readings on or after May 1, 2026.

For MSEZL, KERC approved a net ARR of Rs 65.83 crore against revenue of Rs 72.69 crore from power sales. Power purchase cost was approved at Rs 52.40 crore for 89.02 million units. KERC directed MESCOM to refund Rs 2.00 crore to MSEZL on account of interface point cost differences. Operation and maintenance expenses were approved at Rs 2.33 crore. Distribution losses stood at 0.29%, lower than the approved 0.31%. On RPO, MSEZL met its targets through purchases on the Indian Energy Exchange and procurement of 7,730 Renewable Energy Certificates.

For AEQUS SEZ, KERC approved a net ARR of Rs 23.72 crore against revenue of Rs 24.50 crore, reversing the Rs 0.94 crore deficit projected in its petition. Power purchase cost was approved at Rs 20.28 crore for 32.02 million units. KERC directed HESCOM to refund Rs 0.49 crore to AEQUS SEZ for interface point cost differences. Distribution losses were recorded at 0.62%, well below the approved 1.76%, with the improvement attributed to network upgrades including load transfer to a 220 by 110 by 11 kV substation. AEQUS SEZ achieved 79.85% RPO compliance on non HESCOM procurement against a target of 29.91%, supported by open access green power and rooftop solar.

On wheeling charge allocation, KERC clarified in the MSEZL order that the 30 to 70 HT to LT ratio is discretionary and upheld the existing allocation based on actual asset distribution, given the SEZ’s HT dominant network. Both licensees have been directed to maintain separate account heads for refund adjustments to ensure full and transparent disbursement to eligible consumers.

The featured photograph is for representation only.