Tariffs, Price Drivers and 2026 Rules
How electricity tariffs are set in India in 2026 (SERC tariff orders explained)
Who fixes your domestic electricity rate, how a SERC tariff order works, what goes into the bill and where state subsidy, duty and FPPAS come in.
Your household electricity rate in India is fixed by your State Electricity Regulatory Commission (SERC) in a tariff order, not by the DISCOM on its own. The DISCOM files a petition showing what it needs to recover (its aggregate revenue requirement), the SERC holds public hearings, trims what it does not accept, and then publishes the energy charge per unit for each slab, the fixed or demand charge, and the billing rules for each consumer category. The state government may then pay part of your bill as a subsidy, the state's electricity duty is added under state law, and a monthly fuel and power purchase adjustment surcharge (FPPAS) moves the total up or down. Those four layers explain almost every number on a bijli bill.
The legal framework in one page
The Electricity Act, 2003 is the base law. Three parts of it matter most for a household bill:
| Provision | What it does for you |
|---|---|
| Section 61 and the National Tariff Policy | Sets the principles SERCs must follow, including that tariffs should progressively reflect the cost of supply and that cross-subsidies should be reduced |
| Section 62 | The SERC determines the retail tariff for each category of consumer |
| Section 86 | Lists the SERC's functions, including tariff determination and consumer protection |
| Section 65 | If the state wants you to pay less than the SERC tariff, it must pay the difference to the DISCOM in advance |
| Section 42(5) and 42(6) | Requires every DISCOM to have a Consumer Grievance Redressal Forum, with appeal to the Electricity Ombudsman |
| Section 56 | Disconnection for non-payment only after at least 15 clear days' written notice |
The National Tariff Policy, 2016 asks SERCs to keep tariffs for most categories within ±20% of the average cost of supply. In practice, domestic consumers at low slabs often pay less than cost and commercial and industrial consumers pay more. That is why domestic slab rates look low on paper but rise steeply at higher consumption.
Since 2020, the Electricity (Rights of Consumers) Rules, 2020, issued by the Ministry of Power, add consumer rights on new connections, metering, billing, disconnection and compensation. They were amended in 2023 to introduce time-of-day tariffs and to change how smart-meter data is used for sanctioned load. See time-of-day tariffs and smart prepaid meters.
How a tariff order is made
- Petition. The DISCOM files its revenue requirement for the year or for a multi-year control period, with a proposed tariff. Maharashtra's MSEDCL, for example, filed for the five years FY 2025-26 to FY 2029-30 in Case No. 217 of 2024.
- Public notice and hearings. The SERC publishes the petition, invites objections and holds hearings, often in several cities. Anyone can object in writing.
- Order. The SERC issues the tariff order, usually before the financial year starts, though many are delayed. The order contains a tariff schedule: the actual rates you pay.
- Review, true-up and appeal. A DISCOM or consumer can ask the SERC to review an order, and appeals go to the Appellate Tribunal for Electricity (APTEL). Past years are "trued up" against actual costs, which can lead to regulatory surcharges later.
Not every state issues a fresh order every year. Delhi's DERC last issued a full tariff order for FY 2021-22, which kept the earlier domestic rates unchanged, and in January 2026 it extended its Business Plan Regulations to FY 2026-27 instead. Tamil Nadu's TNERC uses a multi-year order with an annual CPI-linked revision: Suo-motu Order No. 6 of 2025, dated 30 June 2025 and effective 1 July 2025, raised rates by 3.16% for most categories and provides for the next revision from 1 July 2026. The state comparison sets out the four large states side by side.
The layers on your bill
| Layer | Set by | How it is charged | Guide |
|---|---|---|---|
| Energy charge | SERC tariff order | ₹ per unit (kWh), by slab | Slab tariffs explained |
| Fixed or demand charge | SERC tariff order | ₹ per kW of sanctioned load, or per connection, per month | Fixed charges and duty |
| FPPAS / FPPCA / PPAC | Formula approved by the SERC, applied monthly | % of energy (and sometimes fixed) charges, or paise per unit | FPPAS explained |
| Electricity duty or tax | State legislature or local body | % of charges or paise per unit | Fixed charges and duty |
| Other surcharges | SERC (regulatory, pension trust and similar) | % of charges | How to read your bill |
| Subsidy | State government under Section 65 | Credit on the bill | Free-power schemes |
A short worked illustration
Take a Delhi household using 300 units in a month with a 3 kW sanctioned load. Under the DERC domestic schedule (₹3.00 for 0–200 units and ₹4.50 for 201–400 units; fixed charge ₹50 per kW for loads above 2 kW up to 5 kW):
- Energy charge: 200 × ₹3.00 + 100 × ₹4.50 = ₹1,050
- Fixed charge: 3 × ₹50 = ₹150
- Subtotal before surcharges and duty: ₹1,200
If the DISCOM's FPPAS for that month were, say, 15% (illustrative; Delhi's recoverable FPPAS for June 2026 was reported at about 17–18%), and it applied to both energy and fixed charges, that would add ₹180. Duty and other surcharges come on top. Finally, if the household has opted for the Delhi subsidy, consumption between 201 and 400 units gets a 50% subsidy subject to a monthly cap. The full step-by-step is in electricity bill calculation worked examples, and Tamil Nadu households can try their own units in the electricity bill calculator.
Who regulates whom
| Body | Role |
|---|---|
| SERC (e.g. DERC, MERC, KERC, TNERC) | Retail tariffs, supply code, CGRF and Ombudsman regulations for one state |
| Joint Electricity Regulatory Commissions | Same role for Goa and the union territories, and for Manipur and Mizoram |
| Central Electricity Regulatory Commission (CERC) | Inter-state generation and transmission tariffs, not your home tariff |
| Central Electricity Authority (CEA) | Technical standards, including metering regulations |
| Ministry of Power | Rules under the Act, including the Rights of Consumers Rules, and schemes such as RDSS |
| APTEL | Appeals against SERC orders |
Other guides in this section
- Telescopic slab tariffs explained
- Fixed charges, sanctioned load and electricity duty
- FPPAS and fuel surcharge explained
- Delhi, Tamil Nadu, Maharashtra and Karnataka tariffs compared
- Free electricity schemes by state
- Time-of-day tariff rules
- Smart prepaid meters under RDSS
Frequently asked questions
Can my DISCOM change the rate without a tariff order?
No. Energy and fixed charges come from the SERC's tariff order. What does change month to month without a new order is the FPPAS, which is calculated by a formula the SERC has approved. A DISCOM charging any other unapproved amount can be challenged before the CGRF.
Can I object to a proposed tariff hike?
Yes. When the SERC publishes the DISCOM's petition, it invites written objections and holds public hearings. Notices appear on the SERC website and in newspapers. Objections from residents' welfare associations carry weight when they are specific and backed by numbers.
Why is my rate different from my relative's in another state?
Each state has its own SERC, cost of power purchase, consumer mix, subsidy policy and duty. A unit in one state can cost twice as much as in another for the same consumption.
Does GST apply to my electricity bill?
Supply of electricity is exempt from GST. Electricity duty or tax is a state levy, and some ancillary services such as meter rent or application fees may be treated differently.
Sources and where to check
- Ministry of Power — Electricity (Rights of Consumers) Rules and amendments, RDSS
- Central Electricity Regulatory Commission — national regulatory framework and links to SERCs
- Tamil Nadu Power Distribution Corporation (TNPDCL) — TNERC tariff order T.O. No. 6 of 2025
- Maharashtra Electricity Regulatory Commission — MSEDCL multi-year tariff order and review petitions
- India Code — full text of the Electricity Act, 2003
