In the Matter of Directions for CERC (Deviation Settlement Mechanism and Related Matters) Regulations, 2024 – EQ

Summary:

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## 1. Background – Regulation 9(7) of DSM Regulations, 2024

Regulation 9(7) governs how a **deficit in the Deviation & Ancillary Service (DAS) Pool Account** is settled across regions and recovered from **Designated ISTS Consumers (DICs)**.

### Two recovery mechanisms under Regulation 9(7):

| Period | Recovery Mechanism |
| :— | :— |
| **From effect date till 31.03.2026** | 50% in proportion to drawal at ISTS periphery + 50% in proportion to GNA (General Network Access) |
| **From 01.04.2026 onwards** | In the ratio of **shortfall of reserves allocated by NLDC** to each DIC |

> The regulation also required **NLDC (Grid India)** to prepare a detailed procedure for:
> – Recovery of charges in case of deficit
> – Methodology for computing **shortfall of reserves**
> – Allocation of deficit among DICs

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## 2. The Difficulty Reported by NLDC

**Grid India / NLDC** informed the Commission of significant **operational challenges**, including:

| Challenge | Description |
| :— | :— |
| **High reserve requirement** | The new mechanism requires large reserve allocations, creating operational stress |
| **Quantification methodology** | No established framework to quantify reserves needed for each DIC |
| **Declaration by SLDC** | State Load Despatch Centres need to declare reserves – not yet standardized |
| **Measurement of actual reserves** | Real-time measurement and verification of reserves is complex |
| **Despatch & settlement** | Mechanism for dispatching reserves and settling payments is not yet fully designed |

**Conclusion by CERC:** Additional time is necessary to establish the **requisite framework** for effective implementation.

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## 3. Legal Basis for Intervention

The Commission invoked **Regulation 12** (Power to Remove Difficulty) of the DSM Regulations, 2024, which states:

> *“If any difficulty arises in giving effect to these regulations, the Commission may on its own motion or on an application filed by any affected party, issue such practice directions as may be considered necessary in furtherance of the objective of these regulations.”*

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## 4. CERC Direction – Revised Timeline

| Original Provision | Revised Timeline (per this Order) |
| :— | :— |
| Sub-clause (i) (50% drawal + 50% GNA) valid till **31.03.2026** | ✅ Extended till **04.10.2026** (unless notified otherwise) |
| Sub-clause (ii) (shortfall of reserves) effective from **01.04.2026** | ✅ Deferred to **05.10.2026** (unless notified otherwise) |

> **Net effect:** The existing deficit-sharing formula continues for **another 6 months**, giving NLDC and stakeholders time to finalize the reserve-based mechanism.

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## 5. Business Implications for Stakeholders

### For Designated ISTS Consumers (DICs) – (Large consumers connected to ISTS)

| Impact | Details |
| :— | :— |
| **No sudden change** | The shift to reserve-based allocation is postponed – no new calculation methodology from April 2026 |
| **Predictability** | Existing formula (50% drawal + 50% GNA) remains in force until October 2026 |
| **Preparation time** | DICs can prepare for the new reserve-based mechanism without immediate compliance pressure |

### For NLDC / Grid India

| Implication | Details |
| :— | :— |
| **Additional 6 months** | To develop detailed procedure, quantification methodology, and SLDC coordination |
| **Must now target** | Framework ready for implementation by **05.10.2026** |
| **Approval required** | Procedure must be approved by CERC before implementation |

### For State Load Despatch Centres (SLDCs)

| Implication | Details |
| :— | :— |
| **More time to align** | Need to standardize reserve declaration processes across states |
| **Coordination required** | Must work with NLDC on reserve measurement and reporting |

### For Generators & Ancillary Service Providers

| Implication | Details |
| :— | :— |
| **No immediate change** | Reserve despatch and settlement framework still under development |
| **Potential new revenue stream** | Once reserve-based deficit sharing is implemented, reserves may become more valuable |

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