Explained | How is electricity tariff calculated in Karnataka? Premium

Many common consumers were left wondering why their bills for the month of June were exponentially higher when compared to their regular ones

A file photo of consumers standing in queue to pay their electricity bill in Bengaluru. Most consumers usually check the grand total at the end of their electricity bill. However, there are five components that add up to the grand total. | Photo Credit: Sudhakara Jain

The story so far: Just a few days after the Siddaramaiah-led Congress government promised free power up to 200 units for eligible domestic households in Karnataka under the Gruha Jyothi scheme, came a shocker to citizens as the tariff for the month of June was hiked by an average of ₹2-2.5 per unit across electricity supply companies (escoms). Bangalore Electricity Supply Company (Bescom), which accounts for around 50% of the electricity supply in Karnataka, announced a tariff hike of ₹2.89 per unit for June. Along with this, it should also be noted that Bescom’s electricity tariff for the year 2023–24 has been hiked by 70 paise per unit.  

With many technicalities involved in the drafting of an electricity bill, many common consumers were left wondering why their bills for the month of June were exponentially higher when compared to their regular ones, and worried about the subsequent bill, which will come in July. 

What are the components of an electricity bill?

Most consumers usually check the grand total at the end of their electricity bill. However, there are five components that add up to the grand total.  

1. Fixed charge (FC): This is collected by escoms from each consumer to provide the basic infrastructure necessary to transmit power to each household. It includes the power purchase and infrastructure maintenance charges. Irrespective of a consumer’s consumption, FC has to be paid every month, as the escoms have to continue maintaining the infrastructure, like wires, which transmit power, as well as for buying the consumer’s share of power. A certain cost is fixed depending on the consumer’s sanctioned load. 

2. Energy charge (EC): This is levied on consumers as per their consumption patterns. The Karnataka Electricity Regulatory Commission (KERC) generally fixes a certain energy charge per unit every year. The amount is arrived at by multiplying the energy charge per unit by the number of units consumed, and thus this component varies every month. 

3. Tax: A 9% tax is levied on consumers on their electricity bill every month. After calculating the total energy charge for the month, 9% of that amount is added as tax. 

4. Fuel and Power Purchase Cost Adjustment (FPPCA): When there is a difference between the approved power purchase cost and the actual power purchase cost incurred by escoms, the difference is transferred to consumers as FPPCA with the approval of KERC. This charge varies depending on the price of coal or any other purchasing factor. Apart from power generation by Karnataka Power Corporation Limited (KPCL), escoms would also have to buy power from other sources. The FPPCA could either cause a slight increase in the electricity bill or sometimes go to a negative difference resulting in a refund to consumers. 

5. Arrears: This is simply any dues the consumer owes to escoms. It could result from the non-payment of the bill from the consumer’s end, or if the escoms could not collect the entire charge in a month due to technical reasons.  

6. Additional Security Deposit (ASD): Consumers would usually have to pay a minimum of two months’ security deposit, in accordance with their sanctioned load, just like paying an advance to the owner before availing of a house for rent. When the consumption goes beyond the number of units sanctioned, the security charge for the additional consumption is collected from the consumer in the subsequent bill. Escoms offer interest (as per RBI rates) on the security deposit of consumers. 

What is KERC, and what is its role?

In the year 1999, the KERC was set up by the Karnataka Government under the Electricity Reform Act, 1999 to restructure the power sector, and to take decisions in a professional and independent manner. The responsibilities of power regulation were thus shifted to this Commission.

Under the Electricity Act, 2003, KERC is deemed to be the State Commission for the purpose of Electricity Act, 2003. Since then, it has been discharging its duties as per Section 86 of the Act.  

Apart from receiving tariff revision proposals from all the escoms every year, public hearing of objections, and then approving a new tariff structure keeping in mind the interest of consumers as well as legal provisions, the KERC also acts as a bridge between consumers and escoms.

Consumers can lodge their grievances against escoms with the KERC.  

The bottomline is that no tariff revision, either an increase or decrease, can happen unless it is approved by the KERC. 

What is the tariff revision for 2023-24?

After putting off tariff revision due to the election model code of conduct, the KERC announced this year’s revision on May 12, a couple of days after the Assembly elections and a day before the results were announced.

This time, the Commission approved the steepest hike (8.31%) amounting to an average of 70 paise per unit across all categories to bridge a revenue gap of ₹4,457.12 crore.   

Changes applied to Bescom

Under the tariff structure of the previous year, there were four slabs under which fixed charges and energy charges were calculated. These were reduced to two slabs in this year’s tariff structure for simplification and rationalisation of tariff. 

Previously, those who consumed 0-50 units, used to incur a fixed charge of ₹100 and energy charge ₹4.15 per unit.

Those who consumed 51 – 100 units used to pay a fixed charge of ₹110 and energy charge of ₹5.60 per unit.

Those who consumed 101 – 200 units would pay a fixed charge of ₹175 and energy charge of ₹7.15 per unit. 

This year, after the revision of slabs, those who consume 0 – 100 units would have to pay a fixed charge of ₹110 and energy charge of ₹4.75 per unit.

Those who consume 0 – All Units (could be any number within the sanctioned load) would have to pay fixed charge of ₹210 and energy charge of ₹7 per unit. 

What your bill would add up to in old and new structure

Consider a household consuming 105 units:

Bill in old tariff structure: Fixed charge + Energy charge of ₹4.15 per unit for the first 50 units + ₹5.60 per unit for the next 50 units + ₹7.15 per unit for 5 units

Bill in new tariff structure: Fixed charge of ₹210 + Energy charge of ₹7 per unit for 105 units

Tariff hike of ₹2.89 for June 2023

The tariff for the financial year April 2023 – March 2024 was hiked in May 2023, which meant that the escoms had to collect the tariff for the month of April retrospectively. Thus, a 70 paise per unit arrear would be passed on to consumers in June. 

Along with this, the FPPCA of ₹1.49 per unit for January 2023, which was supposed to be collected in March, but could not be collected due to technical reasons, was also levied in June. From June, the additional 70 paise per unit hike will also be collected. Hence, the tariff will be up by ₹2.89 per unit (for Bescom consumers), but only for June. 

From July, along with the approved fixed charge and energy charge, consumers would have to pay FPPCA of 51 paise per unit until September, and 50 paise per unit between October and December.  

However, those who qualify for the Gruha Jyothi scheme would not have to worry about the FPPCA, as the charge for the qualified quantum of power would be taken care of by the government. The ones who would have to pay the net difference, would have to pay the energy charge for the extra units, plus 9% tax on the amount, and the FPPCA.

• Just a few days after the Siddaramaiah-led Congress government promised free power up to 200 units for eligible domestic households in Karnataka under the Gruha Jyothi scheme, came a shocker to citizens as the tariff for the month of June was hiked by an average of ₹2-2.5 per unit across electricity supply companies
• Under the tariff structure of the previous year, there were four slabs under which fixed charges and energy charges were calculated. These were reduced to two slabs in this year’s tariff structure for simplification and rationalisation of tariff
• Tariff for the financial year April 2023 – March 2024 was hiked in May 2023, which meant that the escoms had to collect the tariff for the month of April retrospectively. Thus, a 70 paise per unit arrear would be passed on to consumers in June.