The Maharashtra Electricity Regulatory Commission (MERC) has introduced a draft set of regulations known as the “Maharashtra Electricity Regulatory Commission (Demand Flexibility and Demand Side Management – Implementation Framework, Cost-effectiveness Assessment; and Evaluation, Measurement and Verification) Regulations, 2024.” These regulations are designed to apply throughout the State of Maharashtra and affect all existing and future distribution licensees operating within the state. They are set to come into effect from the date they are published in the Official Gazette.
The regulations are intended to work alongside the Maharashtra Electricity Regulatory Commission (Multi Year Tariff) Regulations, 2024, and the Maharashtra Electricity Regulatory Commission (Resource Adequacy) Regulations, 2024. They are divided into three main parts: the Implementation Framework, Cost-effectiveness Assessment, and Evaluation, Measurement, and Verification.
Under these regulations, every distribution licensee is required to integrate Demand Flexibility (DF) and Demand Side Management (DSM) into their daily operations. This involves planning, designing, and executing DF and DSM programs that are measurable, replicable, and beneficial for smooth grid operations. The aim is also to contribute to the proper functioning of Resource Adequacy requirements as stipulated in other regulations.
Distribution licensees are allowed to recover all justified costs related to DF and DSM activities. This includes costs for load research, planning, designing, implementing, monitoring, and evaluating these programs. These costs can be added to the Multi-Year Tariff (MYT) filings and annual financial reports. The regulations stipulate that DF and DSM programs must be cost-effective for both consumers and distribution licensees. They should protect consumer interests, be implemented fairly, lead to overall tariff reductions, and support the integration of renewable energy on both the consumer and supply sides.
The regulations require distribution licensees to develop a five-year and one-year DF/DSM portfolio structure. This should be updated regularly and linked to load research and proposed measures for demand flexibility, load management, energy conservation, and efficiency. The impact of these measures, along with a cost-benefit analysis, must be submitted to the Commission. A “DF/DSM program portfolio and implementation action plan” must be submitted three months before MYT tariff filings. The Commission will review this plan and provide approval with specific suggestions or directions to be included in the MYT filings within 60 days.
Distribution licensees are also required to submit an annual “Status report on DF/DSM implementation” by March 31 each year. This report must cover the portfolio performance and allow the Commission to approve or reject any incentives or disincentives claimed by the licensee. For MYT submissions due by November 30, 2024, licensees must provide block estimates and budgets for implementing the DF/DSM portfolio. The detailed plan should be submitted within the first three months of the regulations being notified and approved by the Commission by March 31, 2025.
The regulations outline an incentive scheme for distribution licensees. An incentive of ₹0.20 Crores per MW will be awarded for achievements exceeding the Demand Flexibility Purchase Obligation (DFPO). Conversely, a disincentive of ₹0.20 Crores per MW will be imposed for underachievement. The programs must enhance resource adequacy, offer demand flexibility, reduce peak demand, and incorporate cheaper renewable energy sources.
Demand Flexibility programs may include time-based and selective pumping in irrigation and municipal schemes, smart charging for electric vehicles, behind-the-meter battery storage systems, heat pumps, and thermal energy storage systems. The regulations also include specific energy conservation initiatives for consumers, including domestic and agricultural sectors, to be funded through the DF portfolio budget.
The regulations will assess the economic effectiveness of DF/DSM programs based on various decision variables, including costs, impacts, discount rates, life spans, escalation rates, and avoided costs. Licensees must share cost-effectiveness assessment results as part of their DF/DSM portfolio submission. The Total Resource Cost (TRC) test is the primary evaluation method, followed by the Ratepayer-Impact Measure (RIM) test, which ensures that implementation costs do not adversely impact tariffs. Programs with a Life-cycle Revenue Impact (LRIRIM) exceeding ₹0.005/kWh or 0.05% of the existing tariff will not be implemented. All energy savings must be adjusted for any power shortages.
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