Karnataka High Court stays key CERC DSM 2024 provisions
The High Court of Karnataka has granted interim relief to renewable energy generators by staying the operation of two provisions of the Central Electricity Regulatory Commission (CERC) Deviation Settlement Mechanism and Related Matters (DSM) Regulations, 2024. The stayed provisions relate to changes in the deviation charge formula, tighter deviation bands, and enhanced penalties that came into effect from April 1.
Justice K.S. Hemalekha passed the interim order on a petition filed by the National Solar Energy Federation of India (NSEFI) and several renewable energy generators. The petition challenges the legality of Regulations 6(2)(b) and 8(4) of the 2024 Regulations.
The contested provisions revise the methodology for computing grid deviations and introduce higher financial penalties for generators that do not meet scheduled supply. Petitioners argued that the framework is excessively stringent and lacks scientific basis, given the weather-dependent nature of solar and wind generation.
Senior counsel Sajan Poovayya, representing NSEFI, submitted that the mandatory prior publication requirement under Section 178(3) of the Electricity Act, 2003 was not followed. He stated that the draft regulations released for public consultation did not include the revised deviation formula that was later notified.
According to the petitioners, the final regulations introduced a “material departure” without offering stakeholders a fresh opportunity to respond, undermining the consultative process and principles of natural justice. It was also argued that the revised deviation bands and formula do not align with expert inputs received during consultations.
Without prejudice to their legal challenge, the petitioners informed the court that they are willing to comply with the earlier DSM framework under the CERC (Deviation Settlement Mechanism) Regulations, 2014, including payment of deviation charges for deviations up to 15%.
The court observed that a prima facie case had been established and stayed the operation of Regulations 6(2)(b) and 8(4) of the DSM Regulations, 2024 for the petitioners, specifically in relation to the revised formula and enhanced penalties. The stay will remain in effect until the next hearing. The court also directed that deviation charges continue to be paid under the earlier DSM regime.
