The Kerala State Electricity Regulatory Commission (KSERC) has permitted the Kerala State Electricity Board (KSEB) to procure up to 250 MW of short-term power through exchange-based contingency mechanisms to manage the ongoing summer supply deficit.

The approval allows KSEBL to procure power based on time-slot-wise requirements at the Day Ahead Market (DAM)- cleared price for the day, with a margin of up to ₹0.05 (~$0.0005)/kWh. The procurement is subject to the ceiling rate of ₹10 (~$0.106)/kWh, as notified by the Central Electricity Regulatory Commission, for power exchange transactions.

The approval covers the period until May 15, 2026, or until system conditions stabilize, whichever occurs earlier.

Background

KSEB had filed a petition under Regulation 78 of the KSERC Tariff Regulations, 2021, seeking approval for a structured mechanism for short-term power procurement during contingency periods. The utility proposed a deficit-driven procurement strategy, originally centered on the Term Ahead Market (TAM), with pricing linked to DAM discovery and a ceiling of ₹10/kWh plus a margin of up to ₹0.05/kWh.

The Commission noted that KSEB’s proposal for next-day procurement after DAM transactions is effectively a Day Ahead Contingency Contract, as defined under the CERC Power Market Regulations, 2021. It observed that price discovery mechanisms for such contracts are already established and subject to the ceiling price framework applicable across exchange-based markets.

KSEB submitted that it had taken measures to address the projected demand-supply gap during April and May 2026. These included procurement through the DEEP portal, banking and swap arrangements with multiple state utilities, and securing additional allocations from central generating stations. Despite these efforts, the utility reported persistent peak and average deficits during late April and early May.

The utility highlighted operational constraints in existing procurement channels. The DEEP portal requires a minimum continuous procurement duration of 15 days, limiting its flexibility for short-duration needs. It also pointed to the limited availability of power in exchange markets during peak periods, with low clearing volumes in the DAM, which forced it to overdraw 300 MW to 400 MW in several time blocks, exposing it to higher Deviation Settlement Mechanism charges.

Commission’s Analysis

The Commission’s analysis of system data for March and April 2026 showed a significant mismatch between daytime and peak demand. Peak demand on weekdays ranged between 5,900 MW and 6,000 MW, while daytime demand remained around 3,500 MW. The Commission noted that KSEB had been surrendering up to 1,000 MW of contracted power during daytime to accommodate solar generation, while facing shortages during evening and night peak hours.

The regulator also observed that market prices in short-term exchanges remained elevated during peak periods, frequently reaching ₹10/kWh, while transaction volumes in the DAM and real-time markets were limited. This constrained KSEB’s ability to procure adequate power and increased reliance on overdrawal, resulting in higher system costs.

At the same time, KSERC raised concerns over KSEB’s planning and monitoring practices. It noted the absence of a robust daily monitoring mechanism and inadequate analysis of factors contributing to increased demand, including reduced summer rainfall and shifts in consumption patterns such as increased reliance on electric cooking due to LPG shortages. Similar summer demand conditions had occurred in previous years and could have been better managed through proactive planning, demand-side measures, and optimized swap arrangements.

The Commission reiterated that under Regulation 78(5) of the Tariff Regulations, prior approval is not required for short-term procurement during contingency situations, provided that the utility submits detailed information for post facto approval within the prescribed timeline.

It also directed KSEB to establish an immediate mechanism to monitor daily demand-supply conditions and procurement decisions, with reporting to senior management, including the Chairman and Managing Director, until May 31, 2026, or until the situation normalizes. The utility must submit day-wise details of procurement, including costs, within one week of completing the transactions.

According to government data published in March 2026, India’s energy consumption reached 149.56 BUs, an 1.8% year-over-year increase.

Subscribe to Mercom’s real-time Regulatory Updates to ensure you don’t miss any critical updates from the renewable industry.