The Central Electricity Regulatory Commission (CERC) introduced the Deviation Settlement Mechanism (DSM) Regulations, 2024, on August 5, 2024, which took effect on September 16, 2024. These regulations outlined a methodology for addressing deficits in the DSM Pool Account, including legacy dues and future deficits. To implement this, the National Load Dispatch Centre (NLDC) submitted a detailed procedure for recovering charges, categorizing dues into two periods: those accrued before September 16, 2024, and those accrued afterward. The Commission approved this procedure on October 15, 2024.
However, NLDC raised concerns through a letter dated December 12, 2024, indicating that certain distribution companies had either not paid or only partially paid the dues raised. These companies questioned the fairness and legality of recovering legacy dues, citing a lack of explicit regulatory provisions in the detailed procedure. This issue prompted the Commission to address the concerns raised by NLDC and reiterate its stance.
The DSM Pool Account is critical for making payments related to ancillary services and deviation charges. Non-payment of dues could delay payments to ancillary service providers, potentially discouraging their participation, which is vital for grid security. A Staff Paper on “Grid Security Charge,” published by the Commission in September 2023, highlighted the deficit in the DSM Pool Account due to high demand and reserve shortages. It proposed a methodology to recover costs associated with reserves and ancillary services. Similarly, the Explanatory Memorandum to the DSM Regulations, 2024, acknowledged a deficit of approximately ₹400 crore as of March 2024 and stressed the need for a robust recovery mechanism.
The Commission emphasized that the DSM Regulations and the approved procedure were designed to address both legacy deficits and ongoing shortfalls. The NLDC’s communication reflected confusion among some distribution companies regarding the order dated October 15, 2024, which approved the detailed procedure for recovering charges in the DSM Pool Account. To address this ambiguity, the Commission clarified that the methodology in the approved procedure is applicable for recovering charges for deficits in the DSM Pool Account from September 16, 2024, onward.
The Commission stressed the importance of timely payments to maintain grid security and ensure smooth operations. With this clarification, the Suo Motu Petition was disposed of, reinforcing the applicability of the recovery mechanism approved in October 2024.
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