Rajasthan Finalizes Demand Flexibility & DSM Regulations 2026 To Strengthen Power Grid Efficiency

The Rajasthan Electricity Regulatory Commission (RERC) has finalized the Demand Flexibility (DF) and Demand Side Management (DSM) Regulations, 2026, aiming to make the state’s power system more efficient and responsive. The move comes as Rajasthan’s peak electricity demand has reached nearly 20,000 MW, creating pressure on the grid during high consumption periods.

Under the new regulations, the Commission has decided to treat FY 2026–27 as a preparatory phase. During this period, distribution companies (Discoms) will focus on conducting load research, building internal capacity, and preparing systems for implementation. Strict targets for demand flexibility and DSM programs will be enforced from FY 2027–28 onwards. The rules will also apply to any successor entities of existing Discoms, ensuring long-term continuity even if structural changes take place in the sector.

Environmental concerns were a major focus during the public consultation process. The Commission has clearly stated that fossil-fuel-based diesel generators will not be allowed as part of demand response programs. According to RERC, using diesel generators would go against the goals of reducing costs and protecting the environment.

The regulations also bring clarity to the role of aggregators. These entities will combine the electricity demand of multiple small consumers to provide meaningful load reduction. While Discoms will be responsible for onboarding aggregators, they have been directed to create proper guidelines covering registration processes, data privacy, and grievance handling. This is expected to improve transparency and accountability in the system.

Another important change is the expansion of the definition of Independent Verification Agencies (IVAs). The Commission has allowed accredited energy auditors to act as IVAs, increasing the number of qualified professionals who can verify energy savings under DSM programs.

RERC has also included modern solutions such as Cooling-as-a-Service (CaaS) and Building Management Systems (BMS) as eligible categories under DSM initiatives. These technologies can help consumers manage electricity use more efficiently, especially in commercial and large building segments.

For the agricultural sector, which makes up around 45% of the state’s consumers, the Commission has taken a flexible approach. While some stakeholders suggested making battery storage mandatory for solar installations, RERC has decided to address this issue separately under dedicated regulations.

To ensure financial stability, the Commission has retained the Ratepayer Impact Measure (RIM) test. This means that DSM programs must not lead to unfair tariff increases for consumers who are not participating. Although there were suggestions to focus more on carbon reduction, the Commission has prioritized direct financial impacts on consumers for now.

Overall, the new regulations create a performance-based system where utilities are encouraged to improve efficiency while facing penalties for non-compliance. The framework is expected to strengthen Rajasthan’s power sector and support a more reliable and sustainable energy system.