Fuel surcharge formula revamped in Keralam’s power sector; new ‘regulatory asset surcharge’ also gets nod

The surcharge levied on electricity bills in Keralam is set to undergo major changes from 2027-28 onwards with significant consequences for consumers.The fuel surcharge will be calculated not just in terms of the long-term power purchase agreements of the distribution licencee (in Keralam’s case, chiefly the Kerala State Electricity Board (KSEB)), as is done now, but in terms of the total energy procured from all sources including long, medium and short-term purchases.A new regulatory asset surcharge (RA surcharge) will be levied on electricity bills over a four-year period as part of a decision to liquidate the regulatory assets of distribution licencees including that of the KSEB by March 31.Tariff regulationsThe measures are part of the Kerala State Electricity Regulatory Commission’s multi-year tariff regulations for the five-year ‘control period’ from 2027-28 onwards. They will take effect on April 1, 2027.According to the regulations published on Saturday (October 17, 2026), the existing thermal fuel surcharge formula has been replaced with a Fuel and Power Purchase Cost Adjustment Surcharge (FPPAS) mechanism.At present, the KSEB’s purchases under long-term agreements from central generating stations (CGS) and independent power producers (IPP) alone are computed to derive the monthly surcharge on bills to recoup additional spending on the purchases.Under FPPAS, the purchases from all sources, including long-term, medium-term and short-term power purchases, will be considered, meaning that the amount to be recovered under the monthly automatic recovery mechanism would be higher.Amid power shortagesThe changes are coming at a time when Keralam is battling hard to stave off power shortages. Commission officials, however, noted that the measures are needed to ensure compliance with the Centre’s Electricity (Amendment) Rules, 2022. The Rules allow Discoms such as KSEB to automatically pass through the variations in the fuel and power purchase cost to consumers, subject to a ‘true-up’ (a reconciliation process) by the commission.FPPAS will apply to all consumers, except domestic consumers with connected load of and below 1,000 Watts and those having a monthly consumption of and below 40 units.RA surchargeThe regulatory asset of the KSEB for liquidation would amount to roughly ₹5,000 crore. In the case of the power utility’s consumers, the RA surcharge will be levied during 2027-28, 2028-29, 2029-30 and 2030-31. The RA surcharge will be billed at a percentage of the tariff invoice (sum of demand charge and energy charge) raised by the licensee in respect of all demand-based billed consumers.For all other consumers, the RA surcharge will be a combination of ‘rate per kW per month’ and a percentage of the energy charges. It will also be the first instance of an RA surcharge being collected from the KSEB’s consumers. Published - October 19, 2026 06:00 am IST