CSERC’s December 2025 overhaul: RE tariffs, biomass norms, MYT rules and open access clarity

The month of December 2025 marked a period of intense regulatory activity for the Chhattisgarh State Electricity Regulatory Commission (CSERC). In a strategic move to provide clarity, attract investment, and align the state’s power sector with national priorities and technological advancements, CSERC issued a series of orders and regulations. These notifications collectively address renewable energy tariff determination, biomass-specific frameworks, multi-year tariff principles for conventional utilities, and critical clarifications on open access and wheeling charges. This article explains these developments and their implications for developers, distribution licensees, consumers, and the state’s clean energy transition.

I. The foundation: 2025 renewable energy tariff regulations

On 17 December 2025, CSERC notified the Chhattisgarh State Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff for Renewable Energy Sources) Regulations, 2025. Effective from 1 April 2025 to 31 March 2030, this five-year control period forms the economic base for renewable energy projects in the state.

Scope and dual-track tariff mechanism

The regulations apply to new renewable energy projects supplying power entirely to state distribution licensees on a long-term basis. The coverage is broad and includes wind, small hydro, solar photovoltaic including floating solar, solar thermal, non-fossil fuel cogeneration, municipal solid waste, biogas, biomass gasifier, renewable hybrid projects, and renewable energy projects with storage.

A key feature is a two-route tariff mechanism.

Under the generic tariff route, CSERC will notify annual technology-specific preferential tariffs for select categories such as small hydro, solar photovoltaic projects between 0.5 MW and 2 MW, biogas, and non-fossil fuel cogeneration.

Under the project-specific tariff route, tariffs will be determined individually for larger or more complex projects including wind, hydro above 25 MW, solar photovoltaic above 2 MW, solar thermal, floating solar, renewable energy with storage, municipal solid waste, hybrid projects, and projects using old machinery. This allows cost realism for diverse technologies.

Normative parameters providing predictability

The regulations define key normative parameters to ensure predictability for investors.

Capital costs are specified for the first year of the control period, such as Rs 3.5 crore per MW for 0.5 MW to 2 MW solar photovoltaic projects and Rs 890 lakh per MW for small hydro up to 5 MW.

Technology-specific performance metrics such as Capacity Utilisation Factor and Plant Load Factor are prescribed, including 21 percent CUF for solar photovoltaic and 22 to 35 percent for wind depending on wind zone.

Financial assumptions include a 70:30 debt-equity ratio for generic tariffs and tariff periods aligned with useful life, such as 25 years for wind and solar and 40 years for small hydro.

Renewable projects, except certain fuel-based and storage projects, retain must-run status and remain exempt from merit order dispatch.

II. Putting theory into practice: generic RE tariffs for FY 2025-26

CSERC moved quickly from regulations to implementation. Through a suo motu order issued on 26 December 2025, the Commission determined levellised generic tariffs for the first year of the control period, as required under Regulation 9.1.

These tariffs will apply for the full useful life of projects achieving Commercial Operation Date in FY 2025-26.

Small hydro projects will receive Rs 7.42 per kWh to Rs 8.07 per kWh depending on capacity. Non-fossil fuel cogeneration projects will receive fixed charges of Rs 4.50 per kWh and variable charges of Rs 4.93 per kWh. Solar photovoltaic projects between 0.5 MW and 2 MW will receive Rs 3.39 per kWh. Biogas-based projects will receive fixed charges of Rs 4.88 per kWh and energy charges of Rs 6.00 per kWh.

Computational backbone

These tariffs are derived strictly from the normative framework of the 2025 renewable energy regulations. Key inputs include return on equity of 14 percent for most technologies and 15 percent for small hydro, grossed up for Minimum Alternate Tax. Interest on loans is assumed at 10.99 percent and working capital interest at 12.24 percent. Fuel costs are considered at Rs 2,817 per metric tonne for bagasse and Rs 1,761 per metric tonne equivalent for biogas feedstock. The discount rate used for levellisation ranges from 9.21 percent to 9.51 percent depending on technology.

This transparent, methodology-driven approach supports investor confidence. CSERC has invited stakeholder comments by 20 January 2026, and a hearing is scheduled for 22 January, reinforcing a consultative regulatory process.

III. Niche framework: standalone biomass tariff regulations

Recognising the specific operational and cost characteristics of biomass power, CSERC on 30 December 2025 notified the Chhattisgarh State Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff for Biomass based power plants) Regulations, 2025. Effective from 1 April 2026, this five-year framework creates a distinct tariff pathway for biomass plants using Rankine cycle technology.

Transition and procurement shift

A key transition rule has been introduced. New procurement from biomass projects and procurement from existing plants that have completed 20 years of operation will move to competitive bidding under Section 63 of the Electricity Act. This shifts the segment towards market-based price discovery.

For existing power purchase agreements with less than 20 years of operation as of 1 April 2026, the existing tariff continues until completion of the 20-year period. After that, tariff determination will move to Section 62 using the new regulatory norms.

Key norms for Section 62 projects

For plants eligible under cost-plus determination, the regulations specify the following. Useful life is set at 25 years. Capital cost will be determined based on generator submission and prudence check rather than a fixed normative benchmark. This marks an important structural change. Financial parameters include a 70:30 debt equity ratio and 14 percent return on equity grossed up for Minimum Alternate Tax. Performance norms include 80 percent Plant Load Factor, 10 percent auxiliary consumption, and 4,000 kcal per kWh station heat rate. Fuel and O&M norms include a biomass fuel cost of Rs 4,559 per metric tonne for FY 2026-27 and O&M cost of Rs 60.59 lakh per MW, both with annual escalation.

Stringent fuel compliance and penalty

The framework imposes a strong renewable integrity regime. New biomass projects are barred from using fossil fuel. Plants commissioned on or before 31 March 2026 are allowed fossil fuel blending up to 15 percent on an annual calorific value basis.

The Chhattisgarh Renewable Energy Development Agency is designated as the monitoring authority. Violation of the fossil fuel limit in any financial year makes the plant ineligible for preferential tariff for that period. Instead, the offtaker will pay only the weighted average pooled price of non-renewable power. This creates a strong financial deterrent and enforces genuine renewable operation.

IV. Clarifying critical open access knots

On 23 December 2025, CSERC issued a clarification order addressing three long-standing ambiguities related to open access transactions. The order provides certainty to generators and consumers.

Issue I: Intra-state transactions involving STU network

For intra-state transactions where both injection and drawal fall within the same distribution licensee area but power flows through the State Transmission Utility network, both STU transmission charges and distribution wheeling charges will apply along with corresponding losses. This ensures proper cost recovery for all used network segments.

Issue II: Inter-state open access for solar generators

For solar generators connected at 33 kV pooling substations and availing inter-state open access, CSERC clarified that both transmission and wheeling charges are applicable as per prevailing tariff orders. Scheduling at the regional periphery must also factor in both transmission and distribution losses.

Issue III: DSM and billing for mixed source consumers

This clarification addresses consumers who draw power partly from the distribution licensee and partly through open access. CSERC reaffirmed that Deviation Settlement Mechanism charges apply strictly to deviations from schedule.

Actual drawal is first adjusted against contract demand from the distribution licensee.

Fixed charges continue to be billed on contracted load with the distribution licensee. Energy charges are billed on scheduled energy attributable to the distribution component, not actual energy consumed. This prevents billing distortions and ensures alignment with DSM principles.

V. The macro framework: multi-year tariff regulations for FY 2026-30

Issued on 11 December 2025, the Chhattisgarh State Electricity Regulatory Commission (Terms and Conditions for Determination of Multi-Year Tariff) Regulations, 2025 establish tariff and revenue norms for generation, transmission, distribution, and the State Load Despatch Centre for FY 2026-27 to FY 2029-30.

Structure and philosophy

The framework is built on capital investment approval, performance review, and structured truing-up. It aims to balance consumer protection with the financial health of utilities. It mandates segregation of the distribution business into wires and retail supply with defined allocation principles, including full allocation of power purchase cost to the retail supply business and 90 percent of depreciation to wires.

Key financial and operational norms

Return on equity is set at 15.5 percent for generation, transmission, distribution wires, and SLDC, and 16 percent for retail supply. Thermal generation norms cover NAPAF, station heat rate, auxiliary consumption, and compensation for SLDC-directed backing down. Coal pricing follows a transparent methodology for captive coal including ROM price, transport, washing, and quality adjustments.

Innovative inclusions

A dedicated chapter for Battery Energy Storage Systems introduces a tariff framework with capacity charge and performance incentive linked to cycle efficiency. Normative annual availability is 95 percent with minimum round-trip efficiency of 75 percent, signalling readiness for storage integration. SLDC fees will follow an 80:20 split between System Operation and Market Operation charges.

Retail consumers will see a monthly Fuel and Power Purchase Adjustment Surcharge to reflect procurement cost variations in a timely manner.

Conclusion

CSERC has closed 2025 with a decisive regulatory overhaul that shapes Chhattisgarh’s power sector for the next phase. By setting predictable renewable energy economics, introducing a dedicated biomass regime, clarifying open access complexities, and establishing a forward-looking multi-year tariff framework that includes storage, the Commission has created a stable and sophisticated regulatory environment. The real test now lies in execution, but the intent and structure provide a strong starting point for the state’s energy transition.

The featured photograph is for representation only.