CERC proposes DSM-linked congestion charge framework

The Central Electricity Regulatory Commission (CERC) has proposed revising the congestion charge framework for inter-state electricity transmission, replacing the flat rate in place since March 2010. The proposal was issued in an order dated March 13, 2026 (Petition No. 1/SM/2026), with stakeholder comments invited by April 6, 2026.

Proposed mechanism
CERC has proposed linking congestion charges to the Deviation Settlement Mechanism (DSM) Regulations, 2024, which replaced the earlier Unscheduled Interchange (UI) framework. Under the proposal, congestion charges will be set at 1.5 times the applicable DSM deviation rate for each entity and time block.

The rate will vary based on the entity type, wind/solar seller, general seller, or buyer, and the applicable DSM category, including Reference Rate, Contract Rate, or Normal Rate. A floor of Rs 3/unit and a ceiling of Rs 10/unit have been proposed. The floor ensures charges apply even when DSM rates are zero at certain frequencies, while the ceiling limits excessive commercial impact.

Rationale for revision
CERC cited structural changes in the power system as the basis for revisiting the framework. The UI regime underpinning the existing charge has been replaced by DSM. The role of liquid fuel-based generation, which influenced earlier pricing design, has reduced significantly. At the same time, renewable energy, particularly solar and wind, now represents a larger share of grid participation, requiring updated treatment within congestion management.

Renewable exemption declined
Stakeholders including NTPC Green Energy Limited (NGEL) and ASSOCHAM had proposed exempting renewable energy generators from congestion charges, citing the variability of renewable output and overlap with DSM penalties.

CERC rejected these requests, stating that congestion management is linked to grid security and applies uniformly across all entities. The Commission held that exempting renewable generators would create unequal treatment among participants.

The existing congestion charge of Rs 5.45/kWh will continue until the Commission issues a final order following stakeholder consultation and public hearing.

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