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					</table><p>The Karnataka Electricity Regulatory Commission (<a href="https://kerc.karnataka.gov.in/en" target="_blank" rel="noopener">KERC</a>) has clarified that consumers who have rooftop or <span data-teams="true">distributed solar photovoltaic</span> (DSPV) systems need not sign new power purchase agreements (PPAs) if they reduce or increase their contracted demand or approved load.</p>
<p>Their existing PPA tariffs and terms will remain in effect.</p>
<p>KERC issued this clarification in response to a representation by the consumers and other stakeholders regarding the treatment of changes by distribution companies/electricity supply companies (ESCOMs) in contracted demand or approved loads.</p>
<p>The representation stated that when consumers were reducing their contracted demand/approved loads to match their needs, or increasing them without increasing the DSPV’s capacity, the ESCOMS were requiring them to sign new PPAs at reduced tariffs, specifically 90% of the existing PPA rates or the prevailing tariff rates, whichever was lower.</p>
<p>The Commission clarified that a new PPA with a lower tariff, which will be 90% of the prevailing amount, will only apply if the consumers increase the solar capacity.</p>
<p>In July this year, KERC <a href="https://www.mercomindia.com/karnataka-sets-benchmark-tariff-of-%E2%82%B93-07-kwh-for-mw-scale-solar-projects" target="_blank" rel="noopener">issued</a> its generic tariff order for solar power projects. The order is applicable from July 1, 2025, to June 30, 2026. The tariffs apply to MW-scale ground-mounted, DSPV, and rooftop solar projects.</p>
<p>Also, in July, KERC <a href="https://www.mercomindia.com/karnataka-deviation-settlement-guidelines" target="_blank" rel="noopener">issued</a> the Intra-State Deviation Settlement Mechanism and Related Matters Regulations, 2025, to establish a commercial mechanism to ensure grid users’ adherence to scheduled electricity drawal and injection, and maintain grid security and stability.</p>
<p>Recently, the Commission <a href="https://www.mercomindia.com/kerc-proposes-reducing-cross-subsidy-and-cross-subsidy-surcharge-from-fy-2029" target="_blank" rel="noopener">issued</a> the draft Karnataka Electricity Regulatory Commission (Roadmap for Reducing Cross-Subsidy and Cross-Subsidy Surcharge) Regulations, 2025. The draft regulations seek to formally establish a time-bound roadmap for reducing tariff cross-subsidies across consumer categories and to align retail tariffs more closely with the cost of supplying electricity, consistent with statutory requirements and national tariff policy objectives.</p>
<p>In September, KERC <a href="https://www.mercomindia.com/karnataka-trims-bescoms-dues-to-solar-project-to-%E2%82%B9111-9-million" target="_blank" rel="noopener">reduced</a> the reimbursement amount payable by Bangalore Electricity Supply Company to Talettutayi Solar Projects Two from ₹117.5 million (~$1.33 million) to ₹111.9 million (~$1.27 million), following corrections in a review petition.</p>
<p>Subscribe to Mercom’s real-time <a href="https://www.mercomindia.com/product/mercoms-renewable-energy-regulatory-updates" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don’t miss any critical updates from the renewable industry.</p>


Karnataka Clarifies PPA Rules for Demand Changes in Solar Projects


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					</table><p>The Karnataka Electricity Regulatory Commission (<a href="https://kerc.karnataka.gov.in/en" target="_blank" rel="noopener">KERC</a>) has issued its generic tariff order for solar power projects. The order is applicable from July 1, 2025, to June 30, 2026. The tariffs apply to MW-scale ground-mounted, distributed solar photovoltaic (DSPV), and rooftop solar projects.</p>
<p><strong>Tariffs Approved for 2025-26</strong></p>
<p>The final approved tariff for MW-scale ground-mounted solar power projects is ₹3.07 (~$0.035)/kWh. For non-domestic DSPV consumers, the tariff is ₹3.08 (~$0.035)/kWh. For domestic consumers installing systems with a capacity of 1 kW to 10 kW, the tariff is ₹3.86 (~$0.044)/kWh, excluding subsidy.</p>
<p>Consumers eligible under the PM Surya Ghar: Muft Bijli Yojana will receive subsidized tariffs based on system size: ₹2.30 (~$0.026)/kWh for 1 kW to 2 kW systems, ₹2.48 (~$0.028)/kWh for systems between 2 kW to 3 kW, and ₹2.93 (~$0.034)/kWh for systems above 3 kW.</p>
<p>The benchmark capital cost for tariff determination is ₹40,000 (~$465.12)/kWh for domestic DSPV, ₹30,000 (~$348.84)/kWh for other DSPV projects, and ₹32.15 million (~$373,837)/MW for MW-scale projects.</p>
<p><a href="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/07/Screenshot-2025-07-11-121740.png"><img loading="lazy" decoding="async" class="aligncenter wp-image-81851 size-full" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/07/Screenshot-2025-07-11-121740.png" alt="KERC Levelized Tariff" width="835" height="365" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/07/Screenshot-2025-07-11-121740.png 835w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/07/Screenshot-2025-07-11-121740-300x131.png 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/07/Screenshot-2025-07-11-121740-768x336.png 768w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/07/Screenshot-2025-07-11-121740-650x284.png 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/07/Screenshot-2025-07-11-121740-624x273.png 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/07/Screenshot-2025-07-11-121740-600x262.png 600w" sizes="auto, (max-width: 835px) 100vw, 835px" /></a></p>
<p>The Commission had <a href="https://www.mercomindia.com/kerc-proposes-tariff-of-%E2%82%B92-93-kwh-for-pm-surya-ghar-projects-above-3-kw" target="_blank" rel="noopener">proposed</a> the tariffs in March this year.</p>
<p><strong>Terminology Change </strong></p>
<p>The Commission has replaced the term &#8220;Solar Rooftop Photovoltaic&#8221; with &#8220;Distributed Solar Photovoltaic&#8221; (DSPV) projects. This category now includes rooftop systems, ground-mounted systems using elevated structures with a minimum ground clearance of eight feet, facade-mounted installations, and systems covered under virtual net metering (VNM) and group net metering (GNM).</p>
<p>These systems can be installed on residential, institutional, or commercial buildings, provided compliance with local building bylaws and safety regulations is ensured.</p>
<p><strong>Metering Mechanisms and Open Access Benefits</strong></p>
<p>Under the VNM model, consumers of the same category, such as those in residential apartments or government buildings, can use a single solar system to offset consumption across multiple electricity connections. The energy injected into the grid will be compensated for at 75% of the applicable generic tariff.</p>
<p>Smart meters will be mandatory at both the generation and consumption ends. Consumers will be exempt from open access charges if the consumption is confined within the same distribution transformer or 11 kV feeder.</p>
<p>In the GNM model, an individual with multiple connections under the same name can link them under a single solar installation. This facility will be subject to the condition that these individuals have a minimum project size of 5 kW, and that at least 20% of the generated energy is consumed at the source connection. Unutilized units are forfeited. Smart meters will also be mandatory under this model.</p>
<p><strong>Application and PPA Process</strong></p>
<p>The Commission simplified the process for domestic low-tension (LT) consumers installing DSPV systems up to 150 kW by exempting them from signing a power purchase agreement (PPA). For systems exceeding 150 kW, KERC prescribed a standardized process with fixed timelines for site verification, PPA execution, inspection, and final commissioning.</p>
<p>Distribution licensees will face penalties for failing to complete their tasks within five days of consumer work completion. In cases where delays impact commissioning, the benefit of deemed generation will be extended to the consumers.</p>
<p><strong>Connectivity Guidelines</strong></p>
<p>Consumers can use either static or digital meters with communication modules, or opt for smart meters for solar generation metering, effective July 1, 2025. Battery energy storage systems (BESS) are not mandated due to high capital costs and low adoption rates of rooftop solar energy systems.</p>
<p>Installations are permitted up to 100% of the sanctioned load with a tolerance limit of 10% for systems under 10 kW. Procurement from empanelled vendors is not compulsory. Connectivity is permitted at the LT level for capacities up to 150 kW and at the 11 kV high tension level for projects with capacities between 150 kW and 2 MW.</p>
<p><strong>Tariff Computation Parameters and Capital Cost </strong></p>
<p>The financial standards adopted by KERC include a useful life of 25 years, a debt-to-equity ratio of 70:30, an interest rate on debt of 11.1% over a 13-year tenure, a return on equity of 14%, and a working capital interest rate of 11.5%.</p>
<p>Operations and maintenance costs will be ₹791.31 (~$9.20)/kW for DSPV and ₹594,000 (~$6,906)/MW for ground-mounted systems, with an annual escalation rate of 5.72%. Depreciation is fixed at 5.38% annually for DSPV and 6.064% for megawatt-scale projects for the first 13 years.</p>
<p>The capacity utilization factor is fixed at 19% for all project categories, with an auxiliary consumption allowance of 0.25% for MW-scale systems only. No degradation factor is applied.</p>
<p><strong>Relocation and Flexibility</strong></p>
<p>The Commission has allowed consumers to relocate their solar installations within the same distribution companies’ area without requiring any amendment to the PPA, provided the sanctioned load remains unchanged. It also allowed open access consumers to opt for net or gross metering. Electricity supply companies will not compensate any excess energy injected under net metering in a billing month, and it will be treated as free power.</p>
<p>Subscribe to Mercom’s real-time <a href="https://www.mercomindia.com/product/mercoms-renewable-energy-regulatory-updates" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don’t miss any critical updates from the renewable industry.</p>


Karnataka Sets Benchmark Tariff of ₹3.07/kWh for MW-Scale Solar Projects

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