⚡ Quick Read
- What happened: The Karnataka Electricity Regulatory Commission (KERC) has expanded the Discounted Energy Rate Scheme (DERS) to include open access consumers, effective until FY 2028.
- Why it matters: This policy shift allows C&I consumers to leverage seasonal tariff discounts, potentially influencing the financial viability of captive and open-access renewable energy projects.
- Watch: Monitor how these tariff adjustments impact the competitive landscape for third-party power purchase agreements (PPAs) in Karnataka.
Background and Context
The Karnataka Electricity Regulatory Commission (KERC) has officially extended its Discounted Energy Rate Scheme (DERS) to encompass open access consumers. Previously restricted, this inclusion marks a significant regulatory shift in the state’s power market. The scheme, which is slated to remain in force until the financial year (FY) 2028, is designed to incentivize power consumption during monsoon and off-season periods, specifically from July to December, by offering reduced electricity tariffs.
Key Details
Under the expanded DERS, the reduced tariff structure now applies to consumers across all categories, including those utilizing open access. However, participants must adhere to strict operational constraints: they are ineligible for the additional 20% contract demand provision and face penalties for exceeding their sanctioned contract demand.
The methodology for calculating base consumption is clearly defined. For consumers opting into the program in FY 2027 and FY 2028, the base consumption is determined by the average monthly consumption recorded during FY 2025 and FY 2026. In instances where complete historical data is unavailable, the commission mandates using at least six months of available data. For new installations, the base consumption is fixed at 67 units/kVA for high-tension (HT) installations and 57 units/kW for low-tension (LT) installations.
Furthermore, the commission has established protocols for load adjustments. For existing installations that increase contract demand, the enhanced portion is calculated at the aforementioned fixed rates, which are then added to the existing base consumption. Notably, the commission has stipulated that base consumption will not be revised downward if a consumer reduces their contract demand.
What This Means for EPCs and Developers
For EPC contractors and renewable energy developers, this policy adjustment alters the cost-benefit analysis for C&I clients. By providing a structured discount during the monsoon season, the KERC is effectively managing grid demand fluctuations. Developers must now account for these seasonal tariff variations when modeling the internal rate of return (IRR) for open-access solar or wind projects. Clients may prioritize projects that offer flexibility in contract demand management to align with these new regulatory incentives.
What Happens Next
The industry is currently observing a broader trend of regulatory easing for open access in Karnataka. This follows the commission’s decision in February to halve the additional surcharge for open access consumers to ₹0.4 (~$0.004)/kWh. Stakeholders should continue to monitor KERC’s upcoming directives regarding the reduction of cross-subsidy and cross-subsidy surcharges, which are expected to further influence the market starting in FY 2026.
