Kerala's ₹282.5 crore (about $33.9M USD) power purchase: fuel-cost rider in action, ratepayers on the hook
The Kerala State Electricity Regulatory Commission approved costly short-term power purchases totaling ₹282.5 crore (about $34 million USD) at an average ₹9.16 (about $0.11 USD)/unit, nearly double the approved rate, and warned the cost will likely be passed to consumers through tariff.
The Hindu reports that the Kerala State Electricity Regulatory Commission approved KSEB’s short-term power purchases for June, December 2025, noting the financial burden is “excessive” at ₹282.5 crore (about $34 million USD) for 308.43 million units at an average ₹9.16 (about $0.11 USD)/unit, versus the approved ₹4.64 (about $0.06 USD)/unit for 2026-27.[1] This is a textbook fuel-cost pass-through mechanism: the utility buys power at emergency rates, and ratepayers, not shareholders, absorb the spike.
The commission itself warned that “the huge quantum of power purchase at the excessive rates will affect the financials of KSEB and ultimately end up in liquidity problems unless such cost is passed on to the consumers through tariff.”[1] That is the fuel-cost rider at work. Under rate-of-return regulation, fuel and purchased-power costs flow directly to your bill with minimal scrutiny. KSEB’s shareholders face no penalty for under-hedging or for planning that produced a 700+ MW peak-hour deficit. Heads they win, tails you pay.
The commission also noted “discrepancies in the load generation balance (LGB) prepared by KSEB.”[1] Yet it approved the purchases anyway, citing urgency. This is the pattern: a utility brings a crisis forecast, the regulator has no real alternative but to approve, and the cost is rider-collected outside a general rate case. The result: your monthly bill rises without the discipline of a full rate review. The average per-unit cost of ₹9.16 (about $0.11 USD) is nearly double the approved long-term rate of ₹4.64 (about $0.06 USD), a 97% premium that lands entirely on ratepayers.
The alternative is not complex. KSEB should be required to publish its load-generation balance and hedging strategy quarterly, with independent audit. The commission should impose a prudency review on any purchase above a threshold (say, 20% over the approved average cost) before allowing recovery. And fuel-cost riders should include an earnings test: if the utility’s actual return exceeds its authorized ROE, the excess must be credited to ratepayers, not pocketed. Kerala’s consumers need a seat at the table, an intervenor funded by a small per-bill surcharge, like the Office of Public Counsel in Florida or the Utility Consumer Advocate in Ohio, to challenge these purchases before they are approved, not after the bill arrives.