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The Kerala State Electricity Regulatory Commission (KSERC) has come out with the draft Kerala State Electricity Regulatory Commission (Multi Year Tariff) Regulations, 2026. The draft sets out the proposed tariff framework for the next control period.
The draft was issued through a notice dated 24, August 2026. It has been prepared as the existing Multi Year Tariff framework approaches the end of its current control period in FY 2026-27. The proposed framework is intended to apply from FY 2027-28 and introduces several changes covering tariff determination, power purchase costs, regulatory assets, distribution operations, energy storage systems, and consumer billing.
This is important because the draft is not limited to a routine revision of tariff calculations. It proposes changes in the way electricity costs are recovered, how distribution licensees plan their power procurement, how Energy Storage Systems are treated and how tariffs may increasingly reflect demand and time of consumption.
Some of the proposed changes are particularly relevant for distribution licensees and other regulated electricity-sector entities.
These include:
The proposed regulations also introduce a dedicated framework for Energy Storage Systems, including Battery Energy Storage Systems and Pumped Storage Hydro Projects.
Since this is a draft, stakeholders should distinguish between provisions proposed by KSERC and requirements that are already legally effective. The draft itself states that the regulations would come into force only from the date of their publication in the Official Gazette of Kerala.
| Particular | Stakeholder consultation registration |
| Issuing authority | Kerala State Electricity Regulatory Commission |
| Draft regulations | KSERC (Multi Year Tariff) Regulations, 2026 |
| Draft notice date | 24 August 2026 |
| Proposed control period | FY 2027-28 onwards |
| Existing control period | FY 2022-27 |
| Geographic scope | Entire State of Kerala |
| Key regulated areas | Generation, transmission, distribution, SLDC and ESS |
| Major proposed change | FPPAS mechanism replacing existing fuel surcharge formula |
| Regulatory asset | Proposed liquidation by 31 March 2031 |
| Consumer-facing proposals | Demand charges, ToD/ToU, kVAh billing, green tariff |
| Energy storage | Dedicated tariff and operational framework |
| Nature of document | Draft regulations |
| Proposed commencement | Date of publication in Kerala Official Gazette |
| Objection/suggestion deadline | 25 September 2026 |
| Stakeholder consultation registration | Before 18 September 2026 |
The notice specifically invites objections and suggestions from affected persons and stakeholders. Submissions received on or before 25 September 2026 are to be considered before finalisation. Stakeholders intending to participate in the consultation process are required to register through the Commission's registration portal before 18 September 2026.
The explanatory note states that KSERC's existing 2021 regulations were notified on 16 November 2021 for the control period covering 2022-27. Since that control period concludes with FY 2026-27, the Commission has proposed a new MYT framework beginning from FY 2027-28.
The regulatory environment has also changed considerably since the 2021 framework was introduced.
KSERC specifically points to developments involving:
The new draft is therefore intended to bring Kerala's tariff framework in line with these developments.
For regulated entities, the change is not simply about knowing the final tariff rate.
The MYT framework affects how regulated businesses prepare their financial and operational projections for the control period.
Entities may need to pay attention to:
The draft's contents reflect this broad approach. It contains separate chapters covering general MYT principles, tariff determination, financial principles, distribution, transmission, SLDC, generation and Energy Storage Systems.
The proposed regulations have a broad application across Kerala's electricity sector. They are proposed to apply to:
This makes the draft relevant to considerably more stakeholders than just the State distribution utility. An entity involved in generation, transmission, distribution or energy storage may need to assess the provisions applicable to its particular business.
At the same time, not every provision will apply in the same way to every stakeholder.
The draft is divided into business-specific chapters, so applicability depends on the nature of the activity being regulated.
The new framework is intended to operate as a Multi-Year Tariff framework rather than requiring tariff principles to be reconsidered independently for every year.
The existing 2021 framework covers the control period ending with FY 2026-27. The new regulations are proposed for the succeeding control period beginning from FY 2027-28.
This multi-year approach is significant because entities will have to make forward-looking assumptions instead of preparing only for the immediate financial year.
For example, a distribution licensee may need to plan:
These assumptions then become part of the broader tariff determination process.
The draft proposes several changes that could affect both regulatory filings and electricity-sector operations.
The principal changes highlighted by KSERC include:
These changes show a wider shift towards cost-reflective tariffs, demand management, operational efficiency and integration of storage and renewable energy.
The proposed regulations create a structured process for tariff determination under the MYT framework.
The draft contains separate provisions covering:
This means tariff applications are expected to be supported by detailed operational and financial information. The objective is not simply to submit a requested tariff.
The Commission is expected to examine whether the underlying expenditure, assumptions and proposed recovery mechanisms are justified.
Prudence is an important part of the proposed tariff framework.
In practical terms, it means that expenditure proposed for recovery through tariff is not automatically accepted merely because the entity has incurred or plans to incur the expenditure.
KSERC can examine the need, reasonableness and supporting basis for expenditure. This becomes particularly relevant for capital expenditure.
For example, the proposed framework requires a capital investment plan to demonstrate matters such as:
For SLDC capital investment, the draft specifically proposes that projects involving investment of Rs 1 crore or above should be filed with a Detailed Project Report.
The broader implication is straightforward: regulated entities should maintain a strong documentary trail for major expenditure.
Another important feature of the proposed MYT framework is the distinction between controllable and uncontrollable factors. This matters because the financial consequences can be treated differently.
The draft provides that losses arising from approved controllable factors are to be borne by the concerned regulated business and are not to be passed on to consumers in the manner applicable to uncontrollable factors.
For businesses, this makes internal cost control more important.
If an expenditure variation is considered controllable, the entity may not be able to simply recover the resulting loss through consumer tariffs.
This places greater emphasis on:
One of the most significant proposed changes is the replacement of the existing fuel surcharge formula with the Fuel and Power Purchase Cost Adjustment Surcharge, or FPPAS.
KSERC explains that this proposal is intended to comply with the price-adjustment requirement under the Electricity (Amendment) Rules, 2022.
Under the proposed mechanism, changes in fuel and power purchase costs would be passed through to consumers automatically on a monthly basis, subject to Commission oversight and annual true-up.
The mechanism is designed to balance two competing concerns:
How Will FPPAS Be Calculated?
The draft provides a detailed formula in Annexure 3. The calculation considers factors including:
The proposed FPPAS for a particular billing month is linked to changes in the cost of power supplied in the n-2 month.
This means the calculation does not simply use the cost incurred in the same month in which the consumer is billed.
Is the Entire FPPAS Automatically Recoverable?
No. The draft proposes a threshold-based mechanism.
Where the calculated FPPAS is up to 5%, the full amount would be recoverable automatically.
Where it exceeds 5%, the proposed automatic recovery would operate differently:
The draft provides an example.
If the FPPAS works out to 8%, the automatically recoverable amount would be 7.7%, while the remaining 0.3% would be adjusted during true-up.
This is an important consumer-protection feature within the proposed mechanism.
Yes, subject to conditions. The distribution licensee may carry forward all or part of the adjustment to a subsequent month to avoid tariff shock.
However:
The proposal therefore does not allow indefinite postponement of the surcharge.
The proposed framework also emphasizes disclosure. The distribution licensee would be required to:
For compliance teams, this means FPPAS is not simply a tariff calculation exercise. The underlying data, monthly calculations and supporting records will need to be maintained properly.
The proposed regulations take a specific approach to the liquidation of existing regulatory assets. KSERC proposes that the regulatory asset or surplus of distribution licensees be liquidated by 31 March 2031.
For the regulatory asset existing as on 31 March 2024, including carrying cost or interest, the draft proposes four equal instalments beginning in FY 2027-28 and ending with FY 2030-31.
For KSEB Ltd., the Commission would determine the relevant amount after considering the FY 2023-24 true-up and amounts already liquidated or earmarked for liquidation up to 31 March 2027.
How Would the Regulatory Asset Surcharge Work?
The draft proposes an RA surcharge for recovery. For demand-based consumers, it would be a percentage of the tariff invoice.
For other consumers, it would combine:
The draft further proposes that the RA surcharge determined for this purpose would apply to consumers of all licensees in the State.
Licensees purchasing power from KSEB Ltd. would collect the surcharge from their consumers and transfer it to KSEB Ltd. on a monthly basis, subject to the conditions specified in the draft.
This could have a direct impact on consumer billing and therefore requires careful treatment in billing systems and financial records.
Resource planning is another major part of the proposed framework. The explanatory note links the sales and revenue forecast, power procurement plan and capital investment plans with the KSERC Resource Adequacy Regulations, 2026. This means procurement planning is expected to be connected with projected demand rather than being treated as a standalone exercise.
The Renewable Energy and Distributed Energy Resources Integration Plan is also expected to address strategies for meeting RPO/RCO requirements while integrating rooftop solar, energy storage and EV charging infrastructure.
The draft proposes quarterly reporting of actual demand against the demand forecast contained in the approved Resource Adequacy Plan.
The report would need to identify:
This makes demand forecasting a continuing compliance responsibility rather than a one-time exercise performed during tariff filing.
The draft also proposes that distribution licensees use smart-metering infrastructure to obtain time-block-wise generation data from rooftop solar prosumers and other distributed renewable energy systems.
That data is intended to support daily analysis and power procurement planning and is also to be furnished to the SLDC for grid management.
The draft introduces the possibility of demand-based fixed charges for domestic consumers. Under the proposal, fixed charges may be based on the consumer's Recorded Maximum Demand (RMD).
However, the draft recognises that the required metering and associated systems may not immediately be ready. Until the necessary systems are available, the sanctioned connected load would continue to form the basis for fixed charges.
The distribution business or licensee would have to submit a proposal for determining the applicable demand-based fixed charges.
This proposed change could make the structure of domestic electricity billing more closely connected to the consumer's actual demand.
The draft also proposes wider use of Time of Day (ToD) / Time of Use (ToU) tariffs.
The basic idea is to differentiate electricity prices according to when electricity is consumed. The distribution licensee would submit a proposal considering:
The proposed framework includes two broad directions.
Lower Tariff during Lower-Demand or Solar Hours
The licensee may propose a rebate or lower ToD/ToU rate during:
The relevant hours would be identified using system demand and generation data.
Higher Tariff during Peak Hours
A higher rate may apply during identified peak periods.
The proposal would need to be supported by data showing:
The draft also defines proposed time zones as:
| Zone | Proposed Time | Description |
| Zone 1 | 08:00-18:00 | Solar hours |
| Zone 2 | 18:00-23:30 | Peak hours |
| Zone 3 | 23:30-08:00 | Off-peak hours |
These time zones would apply where suitable ABT meters, smart meters or ToD meters are installed. The Commission may review and revise the time zones through separate orders based on changes in electricity consumption patterns.
The proposed regulations also allow distribution licensees to submit proposals for extending power factor incentive/disincentive mechanisms or kVAh billing to different consumer categories.
Where kVAh billing is proposed, the licensee would need to provide supporting analysis.
This includes:
This is important because kVAh billing cannot simply be introduced without considering the metering infrastructure and system-level consequences.
Consumer categories may also be reviewed under the proposed framework. A distribution licensee submitting a re-categorization proposal would need to explain:
The proposal would also need to consider safeguards to reduce tariff shock for consumers being shifted between categories.
This makes tariff classification a data-backed regulatory exercise rather than simply an administrative change.
The draft proposes a framework for Demand Response Programmes. A distribution licensee may submit a Demand Response proposal along with its tariff petition or through a separate petition.
The proposal would need to cover:
The approach is aimed at making consumer demand more responsive to system conditions.
Instead of treating electricity demand as something that utilities can only meet through additional generation or network investment, demand response allows some consumption to be managed in response to system requirements.
Energy Storage Systems receive a dedicated role under the proposed regulations. Where an ESS provides peak-hour support to a distribution licensee, the tariff for that service would be determined by KSERC.
The distribution licensee may submit a proposal for the tariff under the procedure specified in the draft.
This connects energy storage directly with peak-demand management. Instead of using storage only as a technical backup, the proposed framework allows it to become part of the tariff and power-management structure.
The draft also provides for a Green Tariff option. The proposal would allow consumers to opt for 100% renewable energy at a premium, with transparent allocation of costs.
For consumers and businesses looking to increase renewable electricity consumption, this could create another tariff-based route for sourcing renewable power through the regulated distribution framework.
The exact implementation would depend on the final regulatory provisions and subsequent tariff orders.
Energy Storage Systems have their own chapter in the proposed regulations. The framework covers:
The draft states that the chapter applies to tariff determination for ESS, including Pumped Storage Hydro Projects.
It also covers situations where:
Where storage services are procured through a transparent competitive-bidding process under applicable Central Government guidelines, KSERC may adopt the tariff following the prescribed procedure.
The draft allows an ESS Developer and consumers or prosumers to establish community or collective energy storage arrangements.
The parties may mutually agree on matters such as:
However, detailed procedures, accounting mechanisms and charges payable to the distribution licensee would require submission by KSEB Ltd. for Commission approval.
This means the proposal creates room for community storage but does not treat every operational detail as automatically settled.
One particularly important provision concerns inverters. The draft proposes that inverters used in upcoming BESS projects covered under the specified provisions should be Grid Forming Inverters (GFM).
The GFM BESS would also need to comply with applicable requirements for Grid Following Control inverters and relevant Central Electricity Authority grid-connectivity provisions.
This reflects the increasing importance of storage in grid stability and system operation.
The explanatory note also records the CEA's advisory regarding grid-forming inverter capability for upcoming BESS projects, particularly for enhancing grid stability and supporting black-start capability.
Power procurement is treated as a core part of distribution planning. The distribution licensee must submit source-wise cost estimates for power procurement.
The draft provides that:
The draft further proposes that long-term or medium-term power procurement arrangements generally require prior Commission approval.
An exception is provided for purchases from renewable energy sources at the feed-in tariff specified by KSERC.
This places considerable importance on procurement planning and documentation.
The proposed framework places greater emphasis on data. This is consistent with the wider regulatory developments identified by KSERC.
The explanatory note refers to the Electricity Distribution (Accounts and Additional Disclosure) Rules, 2025, which require distribution licensees to prepare Additional Disclosure Statements covering areas such as:
The proposed MYT framework therefore sits within a broader move toward more detailed regulatory reporting.
For compliance teams, maintaining accurate source data becomes increasingly important. A tariff petition is only as reliable as the operational and financial information supporting it.
The State Load Despatch Centre receives a dedicated chapter under the proposed regulations.
The framework covers:
The draft proposes a framework of Key Performance Indicators for the SLDC.
The purpose is to evaluate:
The SLDC's true-up petition would need to contain its actual annual performance against the approved KPIs with supporting documentation. KSERC may then provide performance-linked incentives based on achievement.
Performance-linked incentives are not limited to the SLDC. The explanatory note identifies a broader performance-linked approach for:
This is a significant change in emphasis. Traditional tariff recovery largely focuses on determining what costs can be recovered.
A performance-linked framework adds another question: How efficiently did the regulated entity actually perform?
This can make performance data more important during annual reviews and true-ups.
Entities may therefore need to strengthen their internal systems for tracking performance indicators throughout the year instead of reconstructing performance data at the end of the regulatory process.
The draft proposes repeal of the existing KSERC (Terms and Conditions for Determination of Tariff) Regulations, 2021, subject to savings provisions. However, the transition is not intended to wipe out matters relating to the earlier period.
Proceedings concerning periods up to 31 March 2027, including tariff determination, truing up and review matters, would continue to be governed by the applicable earlier regulations.
The draft also provides that actions already taken under repealed regulations would continue to have effect where they are not inconsistent with the new regulations. This transitional provision is important for entities with ongoing regulatory proceedings.
They should not assume that every existing matter automatically shifts to the new framework once the new regulations take effect.
The draft is still at the consultation stage, so businesses should focus on reviewing applicability and preparing for the proposed framework, rather than treating every provision as a final operative requirement.
A practical review can start with the following areas.
1. Identify Which Provisions Apply: Map the business against the relevant regulatory chapter. For example:
2. Review Existing Regulatory Data: Check whether the business has reliable records for:
3. Review Power Procurement Planning: Distribution licensees should examine whether their current procurement planning can support the proposed Resource Adequacy alignment.
4. Assess Billing-System Readiness: Entities likely to be affected by:
Should assess whether their billing and metering systems can support the proposed mechanisms.
5. Review Energy Storage Projects: ESS Developers and businesses planning BESS projects should examine the proposed tariff, operational and technical provisions.
6. Prepare for Consultation: Stakeholders that have concerns, recommendations or implementation issues should consider submitting them within the consultation period.
The notice states that objections and suggestions received by 25 September 2026 will be considered before finalisation. Stakeholders wishing to participate in the consultation process need to register before 18 September 2026.
The proposed KSERC framework could change how regulated businesses manage tariff compliance. The focus is not just on filing petitions, but also on maintaining reliable data, coordinating across departments and keeping proper records. This can make internal controls and data management a bigger part of regulatory compliance.
1. Greater Coordination across Teams
Tariff compliance may require inputs from several teams, including finance, procurement, operations, billing, IT, metering, projects, energy management, and legal or regulatory functions. Each team may hold information that supports the tariff petition or related filings.
2. More Focus on Accurate Data
A tariff petition cannot be treated as a standalone regulatory filing. It may rely on operational performance, power procurement, capital expenditure, consumer data and other business records. Keeping this information accurate and consistent will become increasingly important.
3. Stronger Controls under the FPPAS Framework
Under the proposed FPPAS framework, licensees would need to calculate the surcharge, disclose it, maintain supporting records and reconcile the amount recovered during the true-up process. This creates a need for clear internal checks and proper documentation.
4. Ongoing Demand Monitoring
Resource adequacy is not limited to preparing a forecast. Licensees would need to compare expected demand with actual demand over time. Regular monitoring can help identify gaps between projections, and actual system requirements.
5. Clear Data Ownership
With more regulatory requirements linked to operational and financial data, businesses may need to clearly define who is responsible for collecting, checking, approving and maintaining each dataset.
6. Better Internal Record-Keeping
Supporting documents may become just as important as the final regulatory filing. Businesses would benefit from maintaining organised records that can support tariff calculations, procurement figures, expenditure claims and true-up adjustments when required.
Overall, the proposed framework points toward a more data-driven approach to tariff regulation. For regulated businesses, strong coordination, reliable data and effective internal controls could become key parts of staying compliant.
Several proposed changes could directly affect consumer billing. The key areas are:
Not all consumers will necessarily experience every change in the same way.
For example, demand-based fixed charges are proposed for domestic consumers, while ToD/ToU and kVAh mechanisms require proposals covering specified consumer categories and appropriate metering infrastructure.
The draft also contains safeguards aimed at reducing tariff shock, including the FPPAS threshold and carry-forward mechanism and transitional arrangements for tariff re-categorization.
The proposed regulations are primarily directed at regulated electricity-sector entities, so businesses should not assume that every provision creates a direct obligation for an ordinary electricity consumer.
However, companies with significant electricity consumption, captive generation, open access arrangements, renewable energy installations or energy storage projects may have a practical interest in the proposed changes.
For such businesses, the important questions may include:
These questions should be assessed once the final regulations and subsequent tariff orders are issued.
The proposed KSERC Multi-Year Tariff Regulations, 2026 represent a broad restructuring of the tariff framework for the next control period.
The draft does not merely revise tariff calculations. It connects tariff determination with resource planning, performance, power procurement, energy storage, and consumer demand and system efficiency.
The most important points are:
The proposed KSERC framework involves several interconnected regulatory and documentation requirements. For businesses operating in the electricity, energy, infrastructure and renewable-energy sectors, understanding which requirements apply can be as important as preparing the underlying documents.
Corpseed can support businesses with regulatory and compliance-related services such as:
For electricity-sector businesses, the first step should be to identify the provisions relevant to the entity's actual activity. The proposed MYT regulations cover different categories of regulated businesses through separate chapters, so a one-size-fits-all compliance approach may not be appropriate.
Corpseed's role is to support the regulatory and compliance side of the process. Technical tariff modelling, power-system operation, engineering design and specialised electricity-sector determinations may require the involvement of appropriately qualified technical professionals.
The proposed KSERC Multi Year Tariff Regulations, 2026 could bring several changes to how electricity tariffs, procurement costs, demand, storage and consumer billing are managed in Kerala. The key takeaways are:
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