KERC Issues 2026 Regulations, Notifies Roadmap to Gradually Reduce Cross Subsidy and Cross Subsidy Surcharge

The Karnataka Electricity Regulatory Commission (KERC) has notified the Karnataka Electricity Regulatory Commission (Roadmap for Reducing Cross-Subsidy and Cross Subsidy Surcharge) Regulations, 2026, outlining a phased plan to rationalise electricity tariffs across consumer categories in the state.

The regulations have been issued in accordance with the provisions of the Electricity Act, 2003, which mandates state regulators to progressively reduce cross-subsidies among various electricity consumer categories. The move also aligns with the Tariff Policy 2016 India that requires tariffs to gradually reflect the actual cost of electricity supply and remain within a ±20 per cent band of the average cost of supply.

According to the Commission, Karnataka has already achieved substantial reduction in cross-subsidies over the past two decades through periodic tariff orders. Currently, most consumer categories, including industrial and commercial consumers, fall within the ±20 per cent threshold prescribed in the national tariff policy.

The notification follows directions from the High Court of Karnataka, which in December 2024 instructed the Commission to frame regulations specifying a clear roadmap for reducing cross-subsidy and cross-subsidy surcharge. The directive came while disposing of a writ petition filed by Renew Wind Energy (Karnataka) Private Limited.

Under the new regulations, the Commission has identified certain consumer categories where cross-subsidy levels remain significantly outside the prescribed limits. The tariff category for EV charging stations (LT-6c), which currently has a cross-subsidy level of about –48.83 per cent for 2027-28, will be gradually brought below –20 per cent over a six-year period starting from FY 2028-29, with a reduction of about five per cent each year.

Similarly, the tariff category for private lift irrigation consumers (HT-3), where the cross-subsidy level stands at around –78.98 per cent for 2027-28, will also be reduced to below –20 per cent over six financial years from 2028-29, with an annual reduction of about 10 per cent.

KERC said that while reducing subsidies for these categories, it will also gradually readjust tariffs of other consumer groups that currently contribute to cross-subsidising them. The Commission reiterated that it will continue efforts to maintain cross-subsidy levels within the ±20 per cent band across all tariff categories in future tariff orders.

The methodology and rates for calculating the cross-subsidy surcharge applicable to open access consumers will continue to follow the framework specified under the national tariff policy issued by the Government of India from time to time.

The regulations will come into force from the date of their publication in the official gazette and will apply to electricity consumers and open access users across the state of Karnataka.