KERC Introduces Demand Flexibility And DSM Regulations 2026 To Improve Power Efficiency In Karnataka

The Karnataka Electricity Regulatory Commission (KERC) has notified the Framework for Demand Flexibility (DF) and Demand Side Management (DSM) Regulations, 2026, marking an important step toward improving electricity management across Karnataka. The new rules came into effect from the date of their publication in the Karnataka Gazette and require all power distribution companies in the state to adopt measures that help manage electricity demand in a more efficient and planned way.

The main aim of these regulations is to reduce peak power shortages and bring down overall electricity consumption. Under DSM programs, utilities can shift electricity usage from peak hours to off-peak periods. This helps in reducing pressure on the grid, improving reliability, and avoiding the need for costly investments in new power infrastructure. At the same time, consumers are expected to benefit through lower electricity bills and better energy efficiency.

A major feature of the new framework is the introduction of Demand Flexibility. This approach uses data and real-time signals such as electricity prices and grid conditions to adjust consumption patterns. It allows utilities to better balance supply and demand while making the system more responsive. To ensure that distribution companies actively adopt these practices, KERC has introduced Demand Flexibility Portfolio Obligations. From the financial year 2026–27, utilities must achieve flexibility equivalent to 0.5 percent of their peak demand. This target will gradually increase every year, reaching 2.0 percent by FY 2029–30.

To support implementation, the commission has also introduced a system of incentives and penalties. Distribution companies that exceed their targets will receive a financial incentive of INR 0.20 crore for every megawatt achieved above the requirement. On the other hand, those who fail to meet the targets will face an equivalent penalty. This structure is expected to encourage utilities to actively invest in demand-side programs.

The regulations also provide a clear list of initiatives that utilities can adopt. These include smart charging of electric vehicles, which helps avoid overloading the grid during peak hours. Time-based electricity use for agricultural pumping and municipal water systems is also encouraged. In addition, utilities can promote the use of thermal storage and battery energy storage systems to manage demand more effectively. Replacing old and inefficient household appliances and running awareness campaigns to guide consumers toward better energy usage habits are also part of the strategy.

To ensure that all programs are financially practical, KERC has made it mandatory for utilities to carry out cost-effectiveness assessments. The Total Resource Cost test will check whether the overall benefits of a program, such as reduced power purchase costs, are higher than the expenses involved. Another test, the Ratepayer Impact Measure, will ensure that these programs do not lead to an unfair increase in electricity tariffs for consumers.

For better transparency and monitoring, distribution companies must set up dedicated DF and DSM cells. They are also required to appoint Independent Verification Agencies to measure and confirm the actual energy savings achieved. In addition, utilities must regularly publish their research data, implementation plans, and progress reports on their official websites.

By replacing the earlier 2015 regulations, the new framework aims to build a more flexible and modern power system where both utilities and consumers play an active role. It is also expected to support environmental goals by reducing greenhouse gas emissions and promoting efficient energy use across the state.