KERALA STATE ELECTRICITY REGULATORY COMMISSION

NOTIFICATION

No.1/1/KERC-2006/XI Dated, Thiruvananthapuram, February 23, 2006

CONDITIONS OF LICENCE FOR EXISTING

DISTRIBUTION LICENSEES, REGULATIONS, 2006.

STATEMENT OF OBJECTS AND REASONS

Section 14 of the Electricity Act, 2003 provides for grant of licence to any person
by the Appropriate Commission to transmit, distribute and undertake trading in electricity
in any area specified in the licence. First proviso to Section 14 provides that any person
engaged in the business of transmission or supply of electricity under the repealed laws
or any Act specified in the schedule on or before the appointed date shall be deemed to
be a licensee under the Act for such period as may be stipulated in the licence or
approval granted under the repealed laws. But the provisions of such repealed laws in
respect of such licensee shall apply for a period of one year from the date of
commencement of the Electricity Act, 2003 or such earlier periods as may be specified
by the Commission at the request of the Licensee. It further provides that the Central
Transmission Utility, State Transmission Utility as well as Government company or a
company referred in sub section (2) of Section 131 and company or companies created
in pursuance of the Act specified in the schedule shall be deemed to be a licensee under
the Electricity Act, 2003.

Section 16 of the Act empowers the Commission to specify any general or

specific conditions which shall apply to either a licensee or class of licensees referred to
in the provisos to Section 14 of the Act and such conditions shall be deemed to be
conditions of such licence. In exercise of the powers conferred on it by proviso to
Section 16 of the Act, Kerala State Electricity Regulatory Commission hereby makes the
following regulations, namely.

Chapter I

GENERAL

1. Short title and commencement.- (1) These Regulations may be called the
Kerala State Electricity Regulatory Commission ( Conditions of Licence for
Existing Distribution Licensees) Regulations, 2006.

(2) They shall come into force from the date of publication in the official gazette.
(3) They shall apply to the State of Kerala.

2. Definitions.- (1) In these Regulations,

(a) ‘Act’ means the Electricity Act, 2003 (Central Act No. 36 of 2003);

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 (b) ‘Commission’ means the Kerala State Electricity Regulatory Commission

(2) Words or expressions occurring in these Regulations and not defined herein,
but defined in the Act shall bear the same meaning as in the Act.

3. Conditions of Licence.-The General and Special Conditions of Licence

applicable to existing Distribution licensees in Kerala State shall be as set in Form -1
appended to these regulations.

4. Amendment of Licence.- (1) Where in its opinion the public interest so

permits, the Commission may, on the application of the licensee or otherwise, make
such alterations and amendments in the terms and conditions of licence as given in
Form-I; provided that no such alterations or amendments shall be made except with the
consent of the licensee unless such consent has, in the opinion of the Commission,
been unreasonably withheld.

(2) Where a licensee has made an application proposing any alteration or

modifications in his licence under Section 18 of the Act, the licensee shall, within seven
days of making such application, publish a notice of such application in two English
dailies and two Malayalam dailies circulating in the territory where the licence sought to
be amended operates, giving the following particulars:

a) Brief details of existing licence

b) Proposed amendments for existing licence and brief reasons
for seeking the amendment.

(3) All objections to an application for amendment pursuant to publication of

notice as above, received within 30 days of the date of publication of the notice, shall be
considered by the Commission.

(4) Where an amendment to a licence is proposed by the Commission suo motu,

the Commission shall publish a notice of the same in two English dailies and two
Malayalam dailies circulating in the area in which the licence proposed to be amended
operates, giving such particulars as the Commission deems necessary. All objections to
the proposed amendment shall be considered by the Commission if received within 30
days of the publication of the notice.

(5) Provisions relating to grant of licence shall, as far as may be practicable and
necessary apply to consideration and disposal of application for amendment of licence.

(6) In the case of an application proposing alterations or modifications in the

area of supply comprising the whole or any part of any cantonment, aerodrome, fortress,
arsenal, dockyard or camp or of any building or place in the occupation of the Central
Government for Defence purposes, the Commission shall not make any alterations or
modifications except with the consent of the Central Government.

5. Power to remove difficulties.- If any difficulty arises in giving effect to any of

the provisions of these Regulations, the Commission may, by general or special order,
do anything, not being inconsistent with the provisions of the Act, which appears to it to
be necessary or expedient for the purpose of removing the difficulties.

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 Form I

CONDITIONS OF LICENCE
Part I
DEFINITIONS

1.Definitions.- In this Licence, unless the context otherwise requires:

a) ‘Accounting Statement’ means, for each financial year, the statements for the
licensed business comprising a profit and loss account, a balance sheet and a statement
of sources and application of funds, together with notes thereto and such other details in
the manner as the Commission may direct from time to time and showing the amounts of
any revenue, cost, asset, liability, reserve or provision, which has been either:
(i) charged from or to any other business together with a description of the basis
of that charge; or
(ii) determined by apportionment or allocation between the Distribution Business
and any other business of the Licensee or together with a description of the
basis of the apportionment or allocation;
b) ‘Act’ means the Electricity Act, 2003 ;
c) ‘Annual Accounts’ means the accounts of the distribution licensee prepared in
accordance with the provisions of the Companies Act, 1956 (1 of 1956) and/or other
relevant acts or the manner as may be directed by the Commission in terms of the
provisions of the Act;
d) ‘Area of Distribution’ or ‘area of supply’ means the area of distribution stated in the
distribution licence within which the distribution licensee is authorized to establish,
operate and maintain the distribution system and supply electricity;
e) ‘Auditors’ means the distribution licensee’s auditors holding office;
f) ‘Authorized’, in relation to any person, business or activity, means authorized by
licence granted under section 14 of the Act or deemed to be granted under the first,
second, third and fifth provisos to section 14 of the Act or exemption granted under
section 13 of the Act and the regulations of the Commission;
g) ‘Commission’ means the Kerala State Electricity Regulatory Commission;
h) ‘Consumer’ means any person who is supplied with electricity for his own use by a
licensee or the Government or by any other person engaged in the business of
supplying electricity to the public under the Electricity Act, 2003 or any other law for the
time being in force and includes any person whose premises are for the time being
connected for the purpose of receiving electricity with the works of a licensee, the
Government or such other person, as the case may be;
i) ‘Distribution Business’ means any Authorised business of the Licensee in or ancillary
to Distribution, whether on its own account or that of third parties, through any system
owned and/or operated by the Licensee;
j) ‘Distribution licensee’ means a licensee authorized to operate and maintain a
distribution system for supplying electricity to the consumers in his area of supply;
k) ‘Distribution system operating standards’ means the standards related to the
distribution licensee’s operation of the distribution system as approved by the
Commission;

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l) ‘Distribution System Planning and Security Standards’ means the standards related
to the adequacy of the Licensee's planning methods and process for its Distribution
System, approved by the Commission;
m) ‘Force Majeure’ means events beyond the reasonable control of the licensee,
including, but not limited to earthquakes, cyclones, floods, storms, adverse weather
conditions, war, terrorist attacks, civil commotion or other similar occurrences that leads
to any act that would involve a breach of relevant laws or regulations concerned with
electrical safety;
n) ‘Generating Company’ means any company or body corporate or association or
body of individuals , whether incorporated or not , or artificial juridical person , which
owns or operates or maintains a generating station.
o) ‘Grid Code’ means the grid code specified by the Central Commission under clause
(h) of sub-section (1) of section 79 of the Act and includes the State grid code specified
by the State Commission under clause (h) of sub-section (1) of section 86 of the Act;
p) ‘Holding Company’ shall have the same meaning as in section 4 of the Companies
Act 1956;
q) ‘Licensed Business’ means the business of distribution and supply of electricity as
authorized under the distribution licence;
r) ‘Licensee’ means distribution licensee;
s) ‘Major Incident’ means an incident associated with the distribution of electricity,
which results in a significant interruption of service or substantial damage to equipment,
or loss of life or significant injury to human beings, or as otherwise directed by the
Commission and shall also include any other incident which the Commission expressly
declares to be a major incident;
t) ‘Operational Control’ means possessing the authority to operate and/or make
operational decisions;
u) ‘Other Business’ means a business, which is not essential to, but part of, related to
or reasonably incidental to the Distribution Business.
v) ‘Performance Standards’ means the standards as may be specified by the
Commission pursuant to section 57 of the Act;
w) ‘Specific Conditions’ means the conditions in addition or in variation to the general
conditions which the Commission may lay down specifically for a distribution licensee;
x) ‘State’ means the State of Kerala;
y) ‘State Government’ means the Government of Kerala;
z) ‘Subsidiary’ shall have the same meaning as in section 4 of the Companies Act 1956
(1 of 1956);
aa) ‘Trading Licensee’ means an electricity trader having trading licence under section
14 of the Act;
bb) ‘Transfer’ shall include the sale, exchange, gift, lease, license, loan, securitisation,
mortgage, charge, pledge or grant of any other encumbrance or otherwise permitting of
any encumbrance to subsist or parting with physical possession or any other disposition
or dealing;
cc) ‘Use of System’ means use of the distribution system for the transportation or
wheeling of electricity;

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 (2) Words or expressions occurring in this license and not defined herein, but defined
in the Act, shall bear the same meaning as in the Act.

Part II
GENERAL CONDITIONS

2. Compliance with laws, rules and regulations. - (1) The distribution licensee
shall comply with the provisions of the Act, rules and regulations, orders and directions
issued by the Commission from time to time and the provisions of all other applicable
laws, for the time being, in force.
(2) The distribution licensee shall comply with the orders or directions of the
National Load Despatch Centre, the Regional Load Despatch Centre and the State Load
Despatch Centre and other statutory authorities, issued in the discharge of their
functions under the Act.
(3) The distribution licensee shall act in accordance with conditions specified
herein except where the distribution licensee is exempted from any of these conditions
at the time of the grant of licence or otherwise specifically by an approval of the
Commission for deviation.
(4) The Licensee shall monitor its compliance with this licence and any order,
code or guideline it is required to comply with under clause 4 and if the Licensee
becomes aware of a material breach of this licence or any order, code or guideline by
the Licensee, the Licensee must notify the Commission of the material breach, as soon
as possible.

3. Duty of the Licensee .- The Licensee shall have the duty to develop and
maintain an efficient, co-coordinated and economical distribution system in his area of
supply for the purpose of supplying electricity

4. Obligations of the Licensee.- (1) The Licensee has the obligation to supply
power to any person requiring supply of electricity within the area of supply subject to
technical feasibility and fulfillment of terms and conditions of supply by the person
requiring supply.
(2)The Licensee shall always endeavor, subject to applicable regulations or
directives or Force Majeure, to provide quality supply to its Consumers.
(3)The Licensee shall arrange for non-discriminatory open access to its
Distribution System to any person as specified by the Commission. On application made
by any such person, subject to the condition of availability, the Licensee shall offer to
enter into an agreement with that person for the use of the Distribution System :

(a) to accept into the Distribution System electricity provided by that

person,
(b) to deliver such electricity, adjusted for losses of electricity at a
designated exit point as per agreed terms and conditions

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 (c) receive payment for the Use of System charges / wheeling charges
and/or a surcharge as specified by the Commission

Provided that, after a period which appears to the Commission to be reasonable

for the purpose, the Licensee has failed to enter into an agreement with any applicant
pursuant to a request, the Commission may at the request of any party settle such
issues of dispute between the Licensee and that person and the Licensee forthwith enter
into and implement such agreement in accordance with the terms as settled by the
Commission, which shall be binding on the Licensee.
(4) The Licensee shall not deny the default supply service to any consumer
availing open access if demanded by such consumer, on payment of charges in
accordance with the Act and as specified by the Commission.
(5) The distribution licensee shall take all reasonable steps to ensure that all
consumers connected to the distribution licensee’s distribution system receive a safe,
economical and quality supply of electricity as provided in the performance standards,
and other guidelines issued by the Commission in accordance with the provisions of the
Act, rules and regulations framed there under.
(6) The licensee shall take all reasonable steps to detect and prevent:
(a) the theft or abstraction of electricity at premises which are supplied by it;
(b) damage to any electrical plant, electric line or metering equipment through
which such premises are supplied; and
(c) interference with any metering equipment through which such premises are
supplied.
5. Acts Requiring Prior Consent.-(1)The Licensee shall not do the following
acts without the prior written approval of the Commission -
(a) undertake any transaction to acquire by purchase or takeover or
otherwise the utility of any other Licensee
(b) merge his utility with the utility of other Licensee
(c) assign the licence or transfer the utility or any part thereof, by sale,
lease, exchange or otherwise
(d) undertake any act for sale of electricity outside the State or to any
other licnesee within the State.
Provided that approval shall not be required if the utility referred to in clause (a)
or clause (b) is situated in a State other than Kerala.
(2) Any agreement relating to any transaction specified under 5(1) unless
made with the prior approval of the Commission shall be void .
(3) Licensee shall before obtaining such approval under 5(1) from the
Commission, give not less than one month’s notice to every other Licensee who
transmits or distributes electricity in its area of operation.

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 (4) Where such prior approval is required, the Licensee shall file a suitable
application with the Commission disclosing relevant facts in that behalf. The Commission
may within 3 months of the application being filed, approve the arrangement subject to
such terms and conditions or modifications as may be considered appropriate or reject
the same, for reasons to be recorded in writing in support of the order passed.

6.Other Activities of the Licensee.-(1) The Licensee with prior intimation to

the Commission may engage in any other business, only so long as such activity is
likely to result in the optimum utilization of the assets and infrastructure comprising the
distribution system and subject to the following conditions:
(a) provided the distribution business and the conduct thereof by the
Licensee is not prejudiced and / or adversely affected in any manner;
(b) provided that a proportion of the revenues derived from such
business shall, as may be specified by the Commission, be utilized
for reducing the wheeling charges of the Licensee;
(c) provided further that the Licensee shall maintain separate accounts
for each such business to ensure that distribution business neither
subsidizes in any way such business undertaking nor encumbers its
distribution assets in any way to support such business.
(d) the Licensee shall always comply with such guidelines that the
Commission may specify in this regard.
(2) The Licensee shall seek the approval of the Commission before
contracting any loans to, or issuing any guarantee for any obligation of any person,
where the same is either beyond the permissible limits imposed by the statutes, or
cannot be construed as being an exception and/or exemption under the statutes. Loans
to employees pursuant to their terms of service and advances to suppliers in the
ordinary course of business are excluded from the requirement to seek such approval.
(3) The Licensee may authorize any person to carry out any of the functions
that the Licensee is authorized to conduct or carry out under the Act and this licence.
Provided always that:
(a) any such person shall operate under the overall supervision and
control of the Licensee and upon the terms and conditions of this
licence; and
(b) the Licensee shall have, prior to delegating any function inform the
Commission of such action.
(c) the Licensee shall also be responsible for all actions of such person.
7. Conditions of Supply of electricity.-(1)The Licensee shall as required by the
Commission submit a draft ‘Terms and Conditions of Supply’ describing the operating
practices and connection procedure of the Licensee along with draft ‘Agreements for
supply of electricity’ and manual for operation and maintenance of systems and electric
supply lines consistent with Act and Kerala Electricity Supply Code, 2005, for the
approval for the Commission.
(2) The terms and Conditions of Supply and Agreement for supply of electricity
shall be fair and reasonable to the consumers and shall be in accordance with the Act,
other Regulations and Codes in force.

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 (3) The Commission shall direct the Licensee to amend the drafts specified
above before the approval if it is found to be unfair and unreasonable. Upon approval of
the Terms and Conditions of Supply along with Agreement for supply of electricity, the
Licensee shall notify the approved documents for use.
(4) The licensee shall always keep in its office an adequate number of printed
copies of the approved conditions of supply of power in English & Malayalam and shall
provide to any person seeking a copy of the same, at cost price. New consumers shall
be provided with the copy of the same along with agreement on payment of cost.

8. Provision of subsidies to certain consumers. - The Licensee shall not,

without prior permission of the Commission, give any subsidy or subvention to, or
receive any subsidy or subvention from any person or any other business of the
Licensee (whether or not authorized by the Commission), except a subsidy granted by
the State Government pursuant to Section 65 of the Act.

9. Accounts. - (1) Unless otherwise permitted by the Commission the financial

year of the distribution licensee for the purposes of this licence shall run from the first of
April to the following thirty-first of March.

(2) The distribution licensee shall, in respect of the licensed business and any other
business,
(a) keep such accounting records as would be required to be kept in respect
of each such business so that the revenues, costs, assets, liabilities,
reserves and provisions of, or reasonably attributable to the licensed
business are separately identifiable in the books of the distribution
licensee, from those of other business in which the distribution licensee
may be engaged;
(b) prepare on a consistent basis from such accounting records and deliver
to the Commission
(i) the accounting statements
(ii) half yearly profit and loss account, cash flow statement and balance
sheet together with such supporting documents and information as
the Commission may direct from time to time;
(iii) in respect of the accounting statements prepared, an auditor’s report
for each financial year, stating whether in their opinion the statements
have been properly prepared and give a true and fair view of the
revenues, costs, assets, liabilities, reserves and provisions of, or
reasonably attributable to such business to which the statements
relate;
(3) The distribution licensee shall not normally change the basis of charge or
apportionment or allocation of revenues or expenses in relation to the preparation of the
accounting statements in respect of a financial year from those applied in respect of the
previous financial year, without prior intimation to the Commission.

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 (4) Where, in relation to the accounting statements in respect of a financial year,
the distribution licensee has changed the basis of charge or apportionment or allocation
from those adopted for the immediately preceding financial year, the distribution licensee
shall, if directed by the Commission, prepare and deliver to the Commission such
accounting statements on the basis of those which were applied in respect of the
immediately preceding financial year.
(5) The accounting statements shall, unless otherwise directed by the
Commission, -
(a) be prepared and published with the annual accounts of the distribution
licensee;
(b) state the accounting policies adopted;
(c) be prepared in accordance with the generally accepted Indian
accounting standards; and
(d) be prepared in the form as the Commission may stipulate from time to
time;
(6) The references to costs or liabilities of, or reasonably attributable to the
licensed business or other business shall be construed as excluding taxation, and capital
liabilities which do not relate principally to such business and interest thereon.
(7) The distribution licensee shall ensure that the accounting statements in
respect of each financial year prepared and the auditor’s report in respect of each
financial year are publicised in such manner as the Commission may direct and are
made available to any person requesting them at a price not exceeding the reasonable
cost of duplicating them.

10. Utilisation of Surcharge.- The Licensee shall keep separate accounts of the
surcharge collected under Section 39(2)(d)(ii), 40(c)(ii) and second proviso to Section
42(2) of the Act, and utilize the same in the manner specified by the Commission.

11. Prohibition of undue preference.- The distribution licensee shall not show
undue preference to any person in the distribution and supply of electricity or rendering
of services in the area of supply:
Provided that any question as to the meaning of undue preference or
unreasonable discrimination shall be decided by the Commission.

Provided that the distribution licensee shall not be deemed to have shown any
such undue preference if any differentiation of the consumer occurs as a result of the
implementation of any order of the Commission or of the order of the State Government
in regard to subsidy payment under section 65 of the Act.

12. Provision of information to the Commission.- (1) The distribution licensee

shall furnish to the Commission without delay such information, documents and details
related to the licensed business or any other business of the distribution licensee, as the
Commission may require from time to time.
(2) The distribution licensee shall duly make available all books, registers and
documents as required under subsection (3) of section 128 of the Act.

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 (3) The distribution licensee shall notify the Commission as soon as possible the
occurrence of any major incident affecting any part of its distribution system and, in any
event, by not later than two weeks from the date of such occurrence, -
(a) submit a report to the Commission giving full details of the facts within
the knowledge of the distribution licensee regarding the incident and
its cause;
(b) in the event the report under clause (a) is likely to take more than two
weeks from the date of such incident, the distribution licensee shall,
within one week from such date of the incident, submit a preliminary
report with such details which the distribution licensee can reasonably
furnish and state reasons as to why the distribution licensee requires
more than two weeks for giving full report of such incident; and
(c) give copies of the report to all parties concerned with the major
incident and to such other persons as the Commission may direct.
(4) The Commission at its discretion may require the submission of a report on
the major incident to be prepared by an independent person to be appointed by the
Commission at the expense of the distribution licensee.
(5) The distribution licensee shall also undertake such studies as the
Commission may direct from time to time to avoid the occurrence of any major incident.
(6) The distribution licensee shall duly inform the Commission about any incident
restricting it from meeting obligations under the licence granted including any act of
omission or commission by others and steps taken by the distribution licensee to
mitigate the effect of such incident.
(7) The Commission may by order, fine the Licensee if the Licensee fails to pay
amount of compensation to such person who suffer substantial injury or to the heirs of
those who lose their lives where a Major Incident has been caused by any act of
commission, omission or negligence on the part of any of the employees or agents of the
Licensee.
(8) The decision of the Commission as to what is a Major Incident shall be final.
(9) The Commission may at any time require the distribution licensee to comply
with the provisions of sub-clause (3) to (6) relating to the incidents which the
Commission may specifically direct and the distribution licensee shall be obliged to
comply with the same notwithstanding that such incidents are not major incidents;
provided that the time limits specified in sub-clause(3) shall commence from the date on
which the Commission notifies the distribution licensee of such requirement.
(10) The distribution licensee shall submit a business plan within three months of
the distribution licence coming in force for such period as the Commission may direct
and shall update such plan annually. The business plan shall contain year wise load
growth, year wise distribution loss reduction proposal along with specific action plan,
metering plan for metering interface points, investment plan, treatment of previous
losses, debt restructuring plan, cost reduction plan, projected profit and loss account,
projected balance sheets, projected cash flow statements and projected important
financial parameters.
(11) The Commission may require the distribution licensee to intimate by the end
of the first quarter of each financial year the progress made in implementing the
business plan of the previous financial year with the comparison of actual achievement
vis-à-vis the plan as approved by the Commission.

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 (12) The licensee shall at all times maintain and provide to the Commission all
relevant data regarding its compliance to standards of performance specified by the
Commission.

13.Transfer or disposal of assets.- (1) The distribution licensee shall give to

the Commission prior notice of its intention to transfer or relinquish operational control
over any asset whose value exceeds the amount specified by the Commission under the
special conditions in Part V and the distribution licensee shall disclose all relevant facts
in the communication to the Commission. The Licensee shall not divide or partition or
split the assets or costs thereof, which would result in circumventing this condition. The
Commission may, within 30 days of the receipt of the notice, seek further information in
support of the transaction and shall, generally within 30 days of such further information
being submitted by the distribution licensee, and where no such further information is
sought by the Commission as aforesaid, within 60 days of prior notice, approve the
transfer arrangement subject to such terms and conditions or modifications as is
considered appropriate or reject the same, for reasons to be contained in the order
issued by the Commission.

(2) The distribution licensee may transfer or relinquish operational control over
any asset as is detailed in any notice given under sub-clause(1) where -
(a) the Commission confirms in writing that it consents to such transfer or
relinquishment of operational control subject to such conditions as the
Commission may impose; or
(b) the Commission does not inform the distribution licensee in writing of
any objection to such transfer or relinquishment of operational control
within the notice period referred to in sub-clause (1) and the transfer is
effected by transparent and competitive bidding procedures.
(3) The distribution licensee may also transfer or relinquish operational control
over any asset where -
(a) the Commission has issued directions for the purposes of this clause
containing a general consent (whether or not subject to conditions) to
-
(i) the transactions of a specified description, and/or
(ii) the transfer or relinquishment of operational control over
assets of a specified description, and/or
(iii) the transfer or relinquishment of operational control in
accordance with any conditions to which the consent is subjected
to,
(b) the transfer or relinquishment of operational control in question is
mandated under any other law; or
(c) the asset in question was acquired and used by the distribution
licensee exclusively or primarily in connection with any other business
and does not constitute a legal or beneficial interest in land, or
otherwise form part of the distribution system or is not otherwise an
asset required for the licensed business.

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 (4) The distribution licensee shall be entitled to utilise the assets as a means of
facilitating financing its investment requirement including collateral for debt financing,
securitisation of receivables, etc, for the licensed business subject to the conditions -
(a) that the distribution licensee will inform the Commission about such
arrangements at least 15 days prior to the effective date of the
relevant agreements;
(b) the distribution licensee acts in a prudent and reasonable manner in
such utilisation of assets; and
(c) the distribution licensee retains the operational control over assets in
the distribution system.
(5) Notwithstanding anything contained in this licence, in case of any emergency
condition, the distribution licensee may transfer the assets subject to the condition that
the distribution licensee shall, immediately after such a transaction, seek post-facto
approval of the Commission giving the detailed facts about the emergency and the
details of the transaction entered into. It shall be the obligation of the distribution
licensee to establish to the satisfaction of the Commission of the presence of emergency
condition necessitating the transfer of the assets.

14. Payment of licence fees.- (1) During the tenure of Licence, the distribution
licensee shall pay to the Commission the licence fees, mentioned in the special
conditions in Part V by Ist April of the financial year.
(2) Where the distribution licensee fails to pay to the Commission any of the fees
due under sub-clause (1) by the due dates,-
(a) without prejudice to other obligations, the distribution licensee shall be
liable to pay interest on the outstanding amount at simple interest at
twice the ruling bank rate payable for the period beginning on the day
after 14 days from the date on which the amount became due, and
ending on the day on which the payment is made to the Commission;
and
(b) in the event of continued default by the distribution licensee, the
Commission shall initiate action for revocation of licence.
(3) The distribution licensee shall be entitled to take into account any fee paid by
it under this licence excluding however the interest for delayed payment as an expense
in the determination of aggregate revenues to be charged to the tariffs

15. Dispute Resolution.- The Licensee, at any time, shall refer any or all
disputes arising under the licence for determination by the Commission or such other
person as the Commission may decide in this behalf.

16. Standards and procedures.- At the request of the Commission,

the Licensee is required to participate and assist the Commission to the extent required
by the Commission in the development, issue and review of any standards, codes,
procedures proposed or notified by the Commission.

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 17. Compliance Examiner .- The Commission shall appoint an
independent examiner to conduct audit and report the results to the Commission on :
a. Licensee’s compliance with obligations/duties under this licence including
obligations to comply with codes and guidelines and
b. The reliability and quality of information reported by the Licensee to the
Commission and the consistency of that information with the Commission’s
specifications.

18. Default by the Licensee.- Any default to exercise authority as is

granted to the Licensee by the Act, Regulations, and this licence, in a situation where it
is necessary to do so, will be construed to be a breach of the conditions of licence

PART III
TECHNICAL

19. Annual Revenue Requirements and Expected revenue from charges.-(1) The
distribution licensee shall -
(a) forecast annually the demand for power within the area of supply in
each of the succeeding 10 years;
(b) prepare and submit such forecasts to the Commission in
accordance with the guidelines issued by the Commission from time
to time;
(c) co-operate with the transmission licensees, the State Transmission
Utility and the State Load Despatch Centre and other licensees in
the preparation of power demand forecasts for the State; and
(d) undertake load research and prepare maximum and minimum load
growth scenarios for the licensee’s area of supply, taking into
account economic growth rates, tariff levels and price elasticity of
demand for electricity.

(2) The distribution licensee shall calculate the Annual Revenue requirements
and expected revenue from charges in accordance with the provisions of the Act, the
regulations, guidelines, orders and directions issued by the Commission from time to
time.
(3) The Licensee shall recover charges only in accordance with the tariffs and
charges approved by the Commission.

20. Power Procurement Procedure.- (1) The Licensee shall prepare and submit
to the Commission its power purchase plan consisting of plans for own generation and
power purchase consistent with load forecast. The licensee while preparing the plan
shall;

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 i. state planning margin or margins adopted by the licensee for the
purpose of preparing the power purchase plan and set out the
methodology and calculations used in arriving at such margin or
margins;
ii. refer to data and assumptions for demand forecasts (including
insofar as relevant to those relating to diversity of demand, own
generation, arrangement for trading, demand of all consumers
including open access consumers, load management, if any);

(2) The Licensee shall not purchase electrical power and/or energy without an
authorization granted by the Commission except for emergent short duration purchases
for less than 1 month.
(3) The Licensee shall in all circumstances purchase electrical power and/or
energy in an economical and efficient manner under a transparent procurement process
as approved by the Commission and following the guidelines issued by the Commission
from time to time relating to preparation of load forecasts, power procurement plan and
power procurement procedure. However purchase of power from Non Conventional
energy sources shall be made within the percentage fixed by the Commission from time
to time.
(4) An authorization required under this condition shall be granted when the
Licensee has demonstrated to the Commission's satisfaction that:
(a) electrical power and/or energy is necessary to meet the Licensee's
service obligations and is consistent with the approved load forecast and
power purchase plan;
(b) the Licensee has examined the economic, technical, system and
environmental aspects of commercially viable alternatives to the
proposals for purchasing electrical power and/or energy (including
arrangements for reducing the level of demand) and such examination
has been carried out in a manner approved by the Commission;
(c ) The Commission may within 90 days grant authorization or may reject the
application of the Licensee recording its reasons in writing. If the
Commission does not grant or reject the application in writing within 90
days, then such permission shall be deemed to have been granted.

(5) In all circumstances the Licensee shall purchase electrical power and/or
energy in a manner
(a) which is in compliance with the State Grid Code;
(b) the details of contracts entered into for power/energy purchases are
furnished to the Commission within one month from the conclusion of
such contracts.
21. Investments.- (1) The distribution licensee shall duly comply with the
regulations, guidelines, directions and orders the Commission may issue from time to
time in regard to the investments to be made in the distribution business.

(2) Licensee shall within one year of grant of licence, prepare a perspective plan
for 5 years anticipating growth in load in the area of supply for upgrading the distribution
system and submit the same to the Commission.

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 (3) Based on the perspective plan , the licensee shall prepare an annual plan for
executing works to meet the requirement of growth in load and for upgrading distribution
system.

(4) The licensee shall submit its annual plan for executing works giving sources
of its funding to the commission every year along with ARR & ERC filing for the following
financial year.

(5) The distribution licensee shall make the investments in a prudent manner
being guided by the duty to build, maintain and operate an efficient, co-ordinated and
economical distribution system.
(6) The distribution licensee shall submit to the Commission investment plans as
a part of the business plan giving details of investment schemes to be undertaken during
the concerned period for the approval of the Commission. The distribution licensee shall
demonstrate to the satisfaction of the Commission that:
(a) there is a need for such investments in the distribution system
contained in the investment plan;
(b) the distribution licensee has examined the economic, technical,
system and environmental aspects of all viable alternatives to the
proposal for investing in or acquiring new distribution system assets to
meet such need.
(7) The distribution licensee shall intimate, by the end of the first quarter of each
financial year -
(a) the annual investment plan with details of investment schemes to be
carried out during the financial year; and
(b) the progress made in implementing the annual investment plan of the
previous financial year with the comparison of actual achievement
vis-à-vis the plan as approved by the Commission for the concerned
period.
(8) The distribution licensee shall not undertake schemes involving major
investments, not covered under the investment plan approved by the Commission
without the prior approval of the Commission, and for such approval the distribution
licensee shall demonstrate to the satisfaction of the Commission the necessity and
prudence of such investment.
(9) The distribution licensee shall invite and finalise tenders for procurement of
equipment, material and/or services relating to major investment, in accordance with a
transparent tendering procedure as may be directed by the Commission. The distribution
licensee shall, in consultation with the Commission,
(a) ensure that material management policy and practices including
calendar of various actions, approvals, tendering, purchase order,
delivery schedule and payments, etc.,are streamlined so as to provide
necessary inputs of right quality at the right time to facilitate faithful
implementation and compliance of the approved standards and
benchmarks.

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 (b) lay down bench-mark prices and conclude rate contracts for
decentralised purchases so as to bring about financial discipline and
inventory control for achieving optimal financial rates in respect of
such decentralised purchases.

22. Compliance with the Grid Code.- (1) The distribution licensee shall comply
with the provisions of the Grid Code in so far as it is applicable to the operation of the
distribution system or otherwise to any of the activities of the distribution licensee.
(2) The Commission may, after consultation with any affected generating
companies, the transmission licensee, the State Transmission Utility, the State Load
Despatch Centre and the electricity traders, issue directions relieving the distribution
licensee of obligation under sub-regulation (1) in respect of such parts of the Grid Code
and to such extent as may be ordered by the Commission.

23. Electricity Supply Code.- (1) The distribution licensee shall abide by the
electricity supply code as may be specified by the Commission from time to time.
(2) The Commission may, at the instance of the licensee, issue directions
relieving the licensee of its obligations under the electricity supply code in respect of
such parts of the licensee’s distribution system and to such extent as may be directed by
the Commission.
(3) The licensee shall make available to any person requesting for it, copies of
the electricity supply code and conditions of supply and practices thereto in force from
time to time, at a price not exceeding the reasonable cost of duplicating it.

24. Distribution system planning and security standards, distribution

system operating standards, performance standards.- (1) The distribution licensee
shall plan, develop and operate its distribution system in accordance with the distribution
system planning and security standards as approved by the Commission;
(2) The distribution licensee shall not be in breach of its obligations if the failure
to meet the distribution planning and security standards or the distribution operating
standards is due to force majore, provided that, the distribution licensee has made
reasonable efforts, to comply with the distribution planning and security standards or the
distribution operating standards, as the case may be.
(3) The Licensee shall comply with the Standards of Performance as approved
by the Commission from time to time. If the Licensee fail to comply with any or all of the
standards of performance, the Licensee shall pay a standard compensation specified by
the Commission to the affected consumer on an application received from such
consumer.
(4) The Licensee shall not include any compensation /penalty/fine paid due to
deficient service in the ARR / cost to be recovered from the consumers

(5) The distribution licensee shall provide annually, information to the

Commission as to the means by which it proposes to achieve the performance
standards and other standards applicable to the distribution licensee.

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 PART IV
OTHER CONDITIONS

25. Complaint Handling Procedure.- (1) The distribution licensee shall

prepare and submit before the Commission for approval its procedure to deal with the
complaints of the consumers.
(2) The Licensee shall make a copy of the approved Complaints handling
Procedure, revised from time to time, available for inspection by members of the public.

(3)The Licensee shall provide free of charge a copy of the Procedure revised
from time to time to each new Consumer, and to any other person who requests for it at
a price not exceeding the cost of duplicating it.

(4)The Licensee shall comply with the Kerala State Electricity Regulatory
Commission (Consumer Grievance Redressal Forum and Electricity Ombudsman)
Regulations, 2005.

26. Consumer Rights Statement.-(1)The distribution licensee shall, within a

reasonable period of time as may be directed by the Commission after the licence
become effective or such other time as the Commission may allow, prepare and submit
to the Commission for approval, a consumer rights statement, explaining to the
consumers their rights as consumers serviced by the licensee.
(2) The Commission may require the distribution licensee to review or amend
the consumer rights statement prepared and the manner in which it has been
implemented with a view to determining whether any modification should be made to it
or to the manner of its implementation.
(3) The distribution licensee shall:-
(a) draw the attention of consumers, to the existence of its consumer rights
statement and each substantive revision of it and how they may inspect
or obtain a copy of such consumer rights statement in its latest form;
(b) make a copy of its consumer rights statement, revised from time to time,
available for inspection by members of the public, at its offices during
normal working hours; and
(c) provide a copy of the consumer rights statement, revised from time to
time, to all new consumers to be served by it, and to any other person
who requests for it at a price not exceeding the reasonable cost of
duplicating it.

27. Consumer’s Right to Information.-(1) A Licensee on request of the

consumer, to the extent that is reasonably available to the Licensee provide with:

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 (a) The information on all services provided by the Licensee including
the information on the charges or alternative tariff schemes which
may be available to the consumers
(b) information on meter readings for the electricity services provided at
the consumer premises by the Licensee ; and
(c) information on the status of the consumer’s ledger account with the
Licensee;
(2) A Licensee may charge reasonable costs for providing such information
unless the information requested is of general nature.

28. Connection and use of system.- The distribution licensee shall make such
arrangements for open access to the use of his distribution system by the users subject,
however, to the availability of the adequate distribution capacity. The distribution
licensee shall always endeavor to provide sufficient capacity in the system.

29. Abuse of powers.- The Licensee in any circumstances shall not enter into
any agreement or abuse its dominant position or enter into a combination, which is likely
to cause or causes an adverse effect on competition in the electricity industry.

30. Penalty for Contravention of Conditions of the Licence.-The Licensee

shall be liable for action under Sections 142 and 146 of the Act in appropriate cases for
contravening any one or more of the provisions of this licence.

31. Terms of Revocation.- The Commission may, at any time after

complying with the requirements of Section 19 of the Act, revoke this licence by 3
months notice in writing to the Licensee. For the purpose of clause (b) of Subsection (i)
of Section 19 of the Act, the breach of any of the Conditions 4 to 32 of this licence are
hereby declared to render the licence liable to revocation.

32. Miscellaneous.- All issues arising in relation to interpretation of this license

and as to the terms and conditions thereof shall be a matter for determination of the
Commission and the decision of the Commission on such issues shall be final, subject
only to the right of appeal under section 111 of the Act.

PART V
SPECIAL CONDITIONS

33. Relinquishment of Operational Control.- Value of Asset which requires

prior notice for relinquishment of operational control as per clause 13 in respect of the
Licensee shall not be less than Rs.25 Lakh.

34. Licence Fee.- The Licensee shall pay every year Licence fee to the
Commission at the rate of 0.03% (subject to revision) of the revenue from sale of power
stated in the certified financial statement of the previous year.

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