The Andhra Pradesh Electricity Regulatory Commission (APERC) has proposed a new framework for procurement, capital investment, cost control, standardization, benchmarking, inventory management, and prudence review for transmission and distribution licensees.

The draft regulations titled ‘Andhra Pradesh Electricity Regulatory Commission (Procurement, Investment and Cost Control) Regulations, 2026’ will apply to transmission projects exceeding ₹200 million (~$2.1 million) and distribution projects exceeding ₹50 million (~$524,500).

It requires licensees to follow approved procurement policies, purchase manuals, standard technical specifications, standard bidding documents, benchmark costs, and investment approval guidelines before such expenditure can be considered for tariff recovery.

Procurement and Tendering Process

Under the draft, every licensee must submit a procurement policy, a procurement manual, standard technical specifications, and standard bidding documents for approval within three months of the regulations coming into force.

The Commission proposed that all investments be planned, designed, and executed in accordance with the Central Electricity Authority’s manual on transmission planning criteria, the electricity distribution network planning criteria, or criteria approved by it.

On tendering, the draft requires procurement to be conducted through transparent, competitive, non-discriminatory, e-procurement-based processes.

Procurement should ordinarily be through open competitive bidding using a two-part bid system consisting of technical and financial bids.

Tender conditions must encourage competition and wider participation. Technical specifications, qualification criteria, turnover requirements, experience conditions, and tender terms must be objective, generic, non-restrictive, and non-discriminatory, and must not favor or exclude any bidder, supplier, contractor, technology, or manufacturer.

Procurement through nomination, proprietary purchase, single tender, or limited tender will be allowed only in exceptional circumstances and will be subject to scrutiny.

Artificial splitting or fragmentation of procurement to avoid competition, approval thresholds, and delegated authority limits will be treated as a violation of the regulation.

Licensees must also establish safeguards against cartelization, collusive bidding, bid rigging, fraud, corruption, coercive practices, and conflict of interest.

Standardization and Benchmarking

Procurement must be guided by standardization, benchmark pricing, lifecycle cost optimization, quality assurance, and total cost of ownership.

Licensees may procure materials and equipment only in accordance with approved specifications and standards.

The Commission may benchmark procurement prices, technical specifications, and project costs against comparable utilities, government agencies, market trends, or national standards, and may disallow unreasonable deviations during the prudence check.

Licensees must submit annual cost data, including material prices, labor rates, and benchmark costs for the ensuing year, by December 31 every year.

Inventory Management

For contract and inventory management, the draft proposes that licensees monitor delivery schedules, quality assurance, testing, performance obligations, and enforcement of contractual terms. They must also establish vendor registration, evaluation, and performance monitoring systems.

Annual procurement and material requirement plans must align with approved programs and system requirements, while excess procurement, avoidable emergency procurement, and the accumulation of slow-moving or non-moving inventory must be avoided.

Transparency

Licensees must publish tender notices, corrigenda, pre-bid clarifications, approved technical specifications, bid results, contract awards, benchmark costs, and other procurement details on their websites and e-procurement portals.

The Commission may also conduct audits, inspections, or verification of procurement, investment, and execution activities, and may direct independent technical, financial, quality, or procurement audits through third-party agencies wherever necessary.

The licensee must maintain auditable procurement records, including tender documents, bids, evaluations, approvals, contracts, and payment records.

Prudence Check

The Commission may disallow any expenditure found to be imprudent, excessive, avoidable, non-competitive, improperly procured, or in violation of the regulation.

The board of directors of each licensee will be responsible for ensuring compliance. Violation of the regulations may attract action, including the disallowance of expenditure.

Last month, APERC approved the state distribution companies’ performance review petitions for the financial year 2025, allowing limited changes to future resource plans, such as revisions to demand, sales, and energy requirements, based on actual performance.

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