Kerala Faces Electricity Rate Hike Amidst Power Crisis and Potential Supply Agreements

Kerala is bracing for a rise in electricity rates within the next two weeks, as the Kerala State Electricity Regulatory Commission (KSERC) prepares to make an official announcement. The Kerala State Electricity Board (KSEB) has requested an increase of Rs 41 paise per unit, although the final decision rests with the commission.

This development stems from the resolution of a case brought forth by the Kerala High Tension and Extra High Tension Industrial Electricity Consumers’ Association in the high court. The court’s intervention spared consumers from bearing the principal amount of bonds issued by KSEB for pension fund financing, potentially resulting in a reduction of 17 paise per unit.

However, if the commission grants approval for the board to recover its previous liabilities through rate hikes, consumers may not enjoy this reduction. Currently, an additional 18 paise is charged as a monthly surcharge on average. If the board maintains these surcharges alongside an increase in rates, it could significantly burden electricity consumers.

As per KSEB’s request, the proposed rate increases are intended to span four years, concluding in 2026-27, with planned hikes of Rs 1044.43 crore in 2023-24, Rs 834.17 crore in 2024-25, Rs 472.64 crore in 2025-26, and Rs 28.80 crore in 2026-27. The commission has also sought public input on this matter.

In the midst of this power crisis, two companies, Arunachal Pradesh Power Corporation Pvt. Limited (APPCPL) and Manikaran Power Limited, have expressed interest in supplying power to KSEB for a brief period to alleviate the situation. Both companies stipulate the return of purchased power by the next monsoon season.

APPCPL has agreed to provide 150 MW in November 2023 and an additional 50 MW during March 1 – 15, 2024. Meanwhile, Manikaran Power is willing to supply power during specific time slots of the day. However, the board is likely to pursue these agreements only if it can reduce in-state power production during the specified period.

APPCPL’s agreement entails returning the purchased power at a later date, while Manikaran Power imposes an additional seven percent cost upon return. Both companies proposed an average rate of Rs 7.50 for tenders related to medium and short-term power supply. The final decision on these contracts ultimately lies with the commission.