KSERC Drafts Amendment To Extend Reduced License Fee For KSEB Under 2025 Regulations

Posted On - 9 April, 2025 • By - King Stubb & Kasiva

Introduction

The Kerala State Electricity Regulatory Commission (KSERC) has tabled a major amendment to extend reduced license fees for the Kerala State Electricity Board (KSEB) under the 2025 Regulations.[1] This February 28, 2025, draft amendment proposes to extend a concessional rate of license fee of 0.015% of KSEB’s power sale revenue for three more financial years (2025–26 to 2027–28). The step is intended to ease the financial burden on KSEB, which has been suffering from mounting losses and operational difficulties, while ensuring the viability of Kerala’s power distribution system. Stakeholders have been requested to provide objections or recommendations prior to finalization of the regulation, followed by a public hearing.

Explanation (Key Points)

  1. Background of License Fee Regulations
    • Under the KSERC (Conditions of Licence for Existing Distribution Licensees) Regulations, 2006, licensees like KSEB were required to pay an annual license fee of 0.03% of their previous year’s revenue from power sales.
    • In 2022, KSERC reduced this fee to 0.015% for three years (FY 2022–23 to 2024–25) to ease KSEB’s financial burden amid mounting losses and liabilities.
  2. Proposed 2025 Amendment
    • Extension of Reduced Rate: The draft amendment allows KSEB to continue paying license fees at 0.015% for FY 2025–26 to 2027–28.
    • Legal Basis: The amendment is framed under Section 86(1)(g) of the Electricity Act, 2003, which empowers state commissions to levy fees.
  3. Rationale for the Amendment
    • Financial Challenges: KSEB has mentioned ongoing losses, operational inefficacies, and exorbitant power purchasing costs in its plea for an extension.
    • Regulatory Fairness: KSERC stressed the requirement to balance economic relief to KSEB with long-term stability of Kerala’s electricity sector.
    • Sector Sustainability: Reduced fees are intended to avoid excessive burden on KSEB, allowing for uninterrupted power supply and infrastructure investments.
  4. Stakeholder Consultation Process
    • The draft is available for public comments until March 28, 2025 (one month after publication).
    • A public hearing will be conducted to hear objections/suggestions prior to finalizing the regulation.
    • The amendment will be effective on April 1, 2025.

Conclusion

The KSERC’s proposed amendment demonstrates a realistic approach to supporting KSEB in the face of continuing financial headwinds. Through the extension of the cut-down license fee, the regulator is attempting to balance reducing the utility’s financial burdens with ensuring strong electricity distribution services to consumers. The action reflects Kerala’s intentions to guarantee affordable and reliable power while creating the long-term sustainability of its energy sector. Stakeholder involvement in the consultative process will prove central to sharpening the regulation and dealing with overall issues regarding accountability and sectoral change. If adopted, the amendment would provide a template for other states confronting similar issues of reconciling regulatory requirements with the sustainability of utilities.

[1] https://dev.erckerala.org/api/storage/draft-regulations/ZNFSJoakN1KXRCqzxj60Gd68QvMWd8Gv2yiY7ZrW.pdf