Stakeholders split over CERC’s proposed DSM regulation changes

Industry bodies and state utilities have expressed divergent views on the draft Central Electricity Regulatory Commission (CERC) (Deviation Settlement Mechanism and Related Matters) (Third Amendment) Regulations, 2026, highlighting differences over proposed changes related to Wind-Solar (WS) sellers, contract rates, payment timelines and grid discipline.

The submissions, filed ahead of the public hearing held on June 30, 2026, reflect differing views on regulatory parity, grid security, financial impact and regulatory certainty. 

Grid India seeks uniform framework for WS sellers

Grid India proposed that all existing WS sellers be treated on par with general sellers from April 1, 2031, eliminating what it described as a dual-track framework.

According to Grid India, the draft regulations could result in “two different computation of deviation charges for WS sellers,” as existing WS sellers would transition to the general seller framework once the variable “X” becomes zero, while new projects covered under proposed Regulation 4A would be treated as general sellers from the outset.

Grid India also referred to the Commission’s March 2026 order in Petition No. 9/SM/2025, which stated that alignment with the general seller framework would require amendments to the DSM Regulations, 2024 through a separate regulatory process following public consultation.

The organisation further recommended early approval of the Detailed Procedure for the National Deviation and Ancillary Services Pool Account. It suggested that amendments to Regulation 10, which link payment timelines to the procedure, should become effective one year after the procedure is approved to allow sufficient time for software development and stakeholder preparedness.

For inter-regional deviations, Grid India proposed that these should be computed “notionally in terms of energy only” without actual fund transfers, through an amendment to Regulation 8(10).

NSEFI opposes WS parity proposal

The National Solar Energy Federation of India (NSEFI) opposed the proposal to align WS sellers with general sellers.

NSEFI argued that India’s existing forecasting infrastructure cannot accurately predict sudden micro-weather variations and stated that equal deviation penalties would increase financial exposure for renewable energy developers without improving grid stability.

The federation also objected to the proposed amendment to Regulation 3 relating to Contract Rates. It said replacing time-block-wise Average Clearing Price (ACP) with the daily weighted average Integrated Day-Ahead Market (I-DAM) price would disadvantage solar projects because solar generation is limited to 6 AM to 6 PM with a 5% error band, while wind projects have a wider generation window and a 10% error band.

To address this, NSEFI proposed capping the Contract Rate for all time blocks at the daily weighted average ACP.

The federation also sought equal treatment for infirm power compensation, recommending that the provision proposed for Standalone Energy Storage Systems (ESS) be extended to wind, solar and hybrid projects.

TNPDCL raises concerns over grid discipline

Tamil Nadu Power Distribution Corporation Limited (TNPDCL) argued that replacing time-block-wise ACP with the daily weighted average ACP under Regulation 3 would weaken the price signal required for grid discipline.

According to TNPDCL, deviations during peak-demand periods could be settled at rates significantly below prevailing market prices, reducing incentives for schedule adherence.

The utility also opposed the proposed treatment of WS sellers, stating that it “merely replaces one form of discrimination with another.” It recommended bringing all existing and future WS sellers under a common DSM framework after a reasonable transition period.

On pumped storage plants (PSPs), TNPDCL opposed linking deviation charges to the energy charge rate under the Tariff Regulations, arguing that PSPs should remain subject to the same DSM rates as other market participants.

TNPDCL also objected to the proposed amendments to Regulation 10, under which payment timelines would be prescribed through a Detailed Procedure instead of the existing statutory 10-day timeline. It said the proposal would reduce regulatory certainty and could affect DISCOM finances.

THDCIL proposes changes to ESS compensation and PSP charges 

THDC India Limited (THDCIL) proposed changes to the draft provisions on infirm power compensation for standalone Energy Storage Systems (ESS), suggesting compensation at 1.25 times the weighted average daily solar-hour ACP of the Day-Ahead Market (DAM) instead of the normal deviation charge rate.

The company also proposed adjusting the value of infirm energy injected into the grid after accounting for the cost of pumping energy and a round-trip efficiency of 75%.

For pumped storage plants (PSPs), THDCIL sought explicit clarification that the Energy Charge Rate (ECR) should apply to both pumping and generation modes for computing deviation charges.

On payment provisions, the company recommended that if payments from the Regional DSM Pool Account or the designated nodal agency are delayed by more than 10 days, beneficiary entities should receive simple interest of 0.04% per day. It argued that the regulations should provide symmetrical interest provisions for both delayed payments and delayed disbursements.

Background

The stakeholder submissions follow the explanatory memorandum issued by CERC on June 16, 2026, outlining the rationale for the proposed amendments. These include the adoption of the daily weighted average ACP for captive generating plants, the phased transition of WS sellers to the general seller framework, and provisions for infirm power compensation for standalone ESS. The draft regulations were issued on May 26, 2026, with implementation proposed from July 1, 2026.  

The featured photograph is for representation only.