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KSERC Approves KSEB’s Power Banking Agreements to Optimize Surplus Energy
Feb 12, 2025
The Kerala State Electricity Regulatory Commission (KSERC) has approved multiple power banking agreements entered into by the Kerala State Electricity Board (KSEB) aimed at optimizing surplus energy for future peak demand periods. These agreements are designed to enhance the efficient management of excess power, particularly from hydroelectric sources, while securing electricity supply during high-demand seasons.
Key Banking Transactions
- KSEB-PSPCL Agreement: This transaction with Punjab State Power Corporation (PSPCL) is effective from May 24, 2024, to June 1, 2024, with 105% of the banked power to be returned in April 2025.
- KSEB-PSPCL via APPCPL Agreement: This agreement, facilitated through Arunachal Pradesh Power Corporation (APPCPL), runs from July 1, 2024, to July 31, 2024. The return of 105.90% of the banked power is scheduled between April 1, 2025, and April 15, 2025.
- KSEB-Manikaran Power Agreement: Covering the period from August 1, 2024, to September 30, 2024, this agreement stipulates the return of 105% of the banked power between March 16, 2025, and May 31, 2025.
These agreements were established to address fluctuating electricity demand, ensuring optimal utilization of hydro resources while securing power for future peak demand periods.
Background
In 2024, KSEB faced significant challenges due to erratic electricity demand. A surge in consumption during the summer raised concerns about power availability. However, heavy rainfall in May 2024 caused an unexpected drop in electricity usage, leading to a surplus, especially from hydroelectric sources. With reservoirs nearing full capacity ahead of the monsoon, KSEB needed to act swiftly to prevent water spillage and avoid wasting surplus energy.
KSEB responded by entering strategic banking agreements with PSPCL, APPCPL, and Manikaran Power. These deals allowed KSEB to transfer excess electricity during periods of low demand in exchange for power during the high-demand summer months of 2025. The agreements mitigated risks associated with excess reservoir storage and helped avoid potential financial losses due to high electricity market prices during peak hours.
Commission’s Analysis
KSERC conducted a comprehensive evaluation of KSEB’s banking transactions, focusing on legal, financial, and operational factors. The Commission found the agreements compliant with regulatory requirements, particularly Section 86(1)(b) of the Electricity Act, 2003, which mandates prior approval for power procurement by distribution licensees. Additionally, Regulation 78(3)(vi) of the KSERC Tariff Regulations, 2021, explicitly permits power banking as a procurement method.
Financially, the Commission recognized the viability of these agreements, noting that banking transactions allowed KSEB to avoid immediate cash outflows while securing energy for future high-demand periods. This strategy enabled efficient financial resource management and ensured an uninterrupted power supply for consumers.
The Commission also assessed the impact on grid stability. The structured distribution of surplus power contributed to maintaining grid stability and preventing adverse effects on transmission systems. Given the high market prices during peak hours, the return of banked power in April and May 2025 will be crucial for meeting anticipated demand surges.
After thorough analysis, KSERC ratified and approved KSEB’s banking transactions, recognizing them as essential for efficient power management. The Commission directed KSEB to ensure the timely return of banked power as per the agreements.
Additional Clarification
In a related development, the Ministry of Power clarified in August last year that energy obtained through open access arrangements, whether via third-party suppliers or captive generation, does not count towards the permissible capacity of banked energy.