The Andhra Pradesh Electricity Regulatory Commission (APERC) has proposed removing the cap of ₹0.4 (~$0.0044)/kWh on the distribution licensee’s monthly pass-through of fuel and power purchase cost adjustment (FPPCA) charges.

The amendment also allows the Commission to issue a true-up or true-down order for FPPCA after the distribution company (DISCOM) submits a petition for the full financial year, by the end of June in the following financial year.

The amendment, titled Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff for Wheeling and Retail Sale of Electricity) Eighth Amendment Regulation, 2026, will be effective from April 1, 2026.

New Formula for Calculating FPPCA Charges

The Commission has revised the formula for calculating the FPPCA charges as follows:

FPPCA = (APPC-BPPC) x PPQ/S

FPPCA = Fuel and power purchase cost adjustment

APPC = The actual weighted average power purchase cost per unit of energy will be calculated as the actual total power purchase cost for the month for which the DISCOM is recovering/refunding FPPCA, divided by the actual quantum of power purchased by the DISCOM from sources approved by the Commission for that month.

BPPC = The base weighted average power purchase cost per unit of energy will be calculated as the total power purchase cost approved by the Commission in the retail supply tariff order for the month for which the DISCOM is recovering/refunding FPPCA, divided by the total quantum of energy approved by the Commission in the retail supply tariff order for the DISCOM for that month.

PPQ = The power purchase quantum for the month for which the DISCOM is recovering/refunding FPPCA. It will be the lower of the actual quantum of power purchases and the actual sales grossed after transmission and distribution losses. The transmission and distribution losses to be considered for the above will be the lower of the actual losses for the month or the Commission-approved losses for that year.

S = Actual sales by the DISCOM for the month for which the distribution licensee is recovering/refunding FPPCA.

Recovery/Refund of FPPCA

The Commission said that FPPCA charges calculated with the revised formula will automatically be recovered/refunded to the consumers by the DISCOM every month in the following ways:

FPPCA will be computed and shown in the current consumption (CC) bills by the DISCOM, in the (n+2)th month, based on actual variations in the costs of fuel and power purchase, and the transmission and scheduling for the power procured during the nth month.

The DISCOM will pass through the FPPCA uniformly across all categories of consumers existing in that month, based on their consumption.

In case the DISCOM fails to compute and raise the FPPCA due to it in the CC bills in the (n+2)th month, the DISCOM will forfeit its right to recover the same for that month. The FPPCA charges not raised by the DISCOM will not be considered by the Commission while issuing the FPPCA true-up/down order after the end of the financial year.

However, if the DISCOM fails to issue FPPCA refunds to consumers, the Commission will consider these amounts while issuing the FPPCA true-up/down order after the end of the financial year.

The DISCOM must submit the monthly details to the Commission as specified under the Regulations by the end of the (n+2) month.

The reports submitted to the Commission will also be made available on the DISCOM’s website. The final true-up/down for the FPPCA for the financial year must also be submitted in accordance with the regulations.

The DISCOM will submit the details of the true-up/down of FPPCA for the nth financial year as part of the Aggregate Revenue Requirement (ARR) for the retail supply business for the (n+2) financial year, if the filings are done on an annual basis. The Commission will determine the true-up/down of the FPPCA amount and include it in the ARR of the retail supply business.

If the filings for the retail supply business are made for the entire control period, the Commission will determine the true-up/down FPPCA amount in separate proceedings, either based on a petition filed by the DISCOM or suo motu.

The Commission will also allow the pass-through of financing costs arising from the time gap between the date the FPPCA true-up/down amount becomes due and the date it is actually allowed in the FPPCA true-up/down order.

The DISCOM will raise the FPPCA bills on the government for consumers who are provided with 100% tariff subsidies under Section 65 of the Electricity Act, 2003. The subsidy true-up/down due to variations in sales of agricultural consumers under the free power category will be determined by the Commission after the end of the financial year.

The DISCOMs must also publish details of the FPPCA computed each month on their websites for at least 1 week before the amounts are shown in the monthly CC bills of consumers.

Commission’s Analysis

The Commission said that the earlier cap on pass-through of FPPCA charges at ₹0.4 (~$(~$0.0044)/kWh was leading to three significant interconnected negative consequences.

It said that the cap on pass-through of FPPCA charges was leading to the accumulation of significant FPPCA true-up amounts and that this would be determined much later. It is argued that sudden, large charges cause severe tariff shocks for all consumer categories.

It said that manufacturers and industries, particularly those operating on tight margins and fulfilling long-term, fixed-price contracts for their goods, face a substantial risk. They raised concerns that when significant FPPCA true-up is levied retroactively, it makes it difficult for them to factor it into the price of goods already sold.

The Commission also noted that the current mechanism for pass-through of FPPCA charges was leading to disputes between property owners and new tenants, as new tenants refused to pay FPPCA true-up amounts calculated based on the energy consumption by the previous tenants.

It further emphasized that under the existing mechanism, restricting the pass-through of FPPCA charges, especially during periods of high and volatile fuel and power prices, forces the DISCOMs to absorb the cost difference for an extended period.

The Commission added that this cost absorption by the DISCOMs reduces their cash flow, increases their working capital requirements, and threatens their financial sustainability and their ability to procure power reliably.

Last year, APERC issued the Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulation, 2025, determining the tariffs for renewable energy projects.

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