THIRUVANANTHAPURAM: As Kerala grapples with recurring power shortages and the prospects of higher electricity tariffs, an old controversy over the fate of the state's long-term power purchase agreements (PPAs) has regained relevance.
The agreements, signed by Kerala State Electricity Board (KSEB) during the UDF government's tenure in 2014, envisaged the purchase of about 465 MW of electricity for 25 years at tariffs of around Rs4.26-Rs4.29 per unit.
For years, the political narrative has largely centred on the then Opposition's allegation that the LDF government cancelled the low-cost agreements, forcing Kerala to later purchase electricity from the short-term market at significantly higher prices.
Interestingly, the official record presents a more nuanced picture of the whole episode.
KSERC role
The agreements were not terminated through a government order. Instead, the Kerala State Electricity Regulatory Commission (KSERC), through an order issued on May 10, 2023, declined to approve the four PPAs, citing procedural and technical deficiencies and concerns relating to consumer interest.
The issue nevertheless became one of the sharpest political exchanges in the Assembly.
The then leader of the Opposition V D Satheesan accused the LDF government of scrapping the UDF-era agreements, arguing that Kerala had abandoned power available at around Rs4.29 a unit only to procure electricity later at much higher rates, thereby inflicting a huge financial burden on KSEB and ultimately on consumers.
The then Chief Minister Pinarayi Vijayan, however, offered a different explanation on the floor of the Assembly.
Responding to the charge, he maintained that the government had not voluntarily cancelled the agreements.
According to Vijayan, the contracts continued even after the LDF assumed office but could not be sustained after KSERC refused regulatory approval, making the Commission's order - not a government decision - the immediate legal basis for their discontinuation.
Revival of contracts sought
Ironically, within months of the regulator's decision, Kerala faced an acute power shortage.
KSEB subsequently approached KSERC seeking permission to procure electricity from the very same generators covered by the unapproved agreements, while the state government also decided to seek revival of the contracts in view of the worsening supply situation.
The sequence of events has now acquired fresh significance as Kerala once again faces concerns over power availability and possible tariff revisions.
The central question is no longer merely who cancelled the agreements.
A more pertinent question is whether the assumptions underlying the regulatory decision ultimately worked in consumers' favour.
KSERC had reportedly concluded that continuing the agreements could impose an additional long-term financial liability on electricity consumers. The underlying premise was that consumers could be better protected by rejecting the agreements.
Where is consumer benefit?
However, Kerala's subsequent dependence on costlier short-term power purchases during periods of shortage has led many to question whether the anticipated consumer benefit actually materialised.
That does not necessarily mean the Commission's decision was legally or procedurally incorrect. Regulators are required to ensure transparent procurement and protect consumer interests over the long term.
Yet, viewed against the state's current power situation, the episode raises a broader policy question: did the cancellation of the long-term agreements ultimately leave Kerala better off, or did subsequent developments undermine the economic assumptions on which the regulatory decision was based?
As the debate over power availability and tariffs intensifies once again, that question may deserve as much attention as the politics that has long surrounded the Rs4.29 power agreements.
