CERC notifies third DSM amendment with tighter norms for renewable energy sellers
The Central Electricity Regulatory Commission (CERC) has notified the third amendment to the Deviation Settlement Mechanism (DSM) and Related Matters Regulations, 2024, introducing changes to deviation charges, energy storage systems and payment timelines. The amended regulations take effect from August 31, 2026, following a public consultation process that received written submissions from 41 stakeholders.
The amendments are intended to strengthen grid discipline as renewable energy penetration increases, while also providing greater clarity on the regulatory treatment of energy storage systems and the settlement of deviation charges.
Wind-solar sellers
A key change brings Wind-Solar (WS) Sellers at par with General Sellers for the purpose of deviation charges for specified categories of projects. The revised treatment will apply to projects being developed through the bidding route where the tendering or bid submission date is on or after January 1, 2027, and to other projects whose commercial operation date is on or after January 1, 2029.
The Commission linked the change to the growing share of renewable energy in the electricity system and the need for greater scheduling discipline. Renewable energy accounted for 51.5% of the generation mix on July 29, 2025, while the Commission also noted increasing instances of high-frequency grid events.
CERC rejected suggestions to defer or withdraw the provision, observing that future projects would have sufficient opportunity to factor the revised operational obligations into their bidding, project design and financing arrangements. Projects already developed under the earlier regulatory framework will continue to be governed by the norms applicable to them under that framework.
Pumped hydro
The amendment also specifies the treatment of deviation charges for standalone pumped hydro storage plants operating under Section 62 of the Electricity Act, 2003. A note added to the regulations provides that such charges will be computed using the energy charge rate specified under the CERC Tariff Regulations, 2024.
The Commission clarified that the specified rate will apply in both generation and pumping modes. It may be reviewed after two years on the basis of implementation experience.
Storage injection
For Standalone Energy Storage Systems, the amended regulations specify the treatment of infirm power injected from the date of first synchronization until successful completion of the trial run. Such injection will be paid for at the normal rate of deviation charges, subject to a ceiling of Rs. 2.00 per kWh.
CERC retained the Rs. 2.00 per kWh ceiling despite stakeholder requests for a higher compensation rate. The Commission noted that infirm injections are occasional and said the framework seeks to provide reasonable compensation while protecting other grid participants from unintended commercial burdens.
Payment timeline
The existing 10-day payment timeline for deviation charges has been retained. At the same time, the National Load Despatch Centre has been given flexibility to specify an alternative payment timeline through a Detailed Procedure, subject to approval by the Commission.
Consequential amendments have also been made to align the DSM regulations with the National Deviation and Ancillary Services Pool Account framework.
Consultation
The Commission considered written submissions received from 41 stakeholders as well as oral representations made during a public hearing held on June 30, 2026. Stakeholders had also raised issues concerning forecasting accuracy, pooling station operations and regulatory consistency.
CERC noted these suggestions but considered them outside the scope of the present amendment. The Commission said such matters would require separate and comprehensive examination rather than being addressed through the current set of amendments.
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