CERC Proposes Third Amendment To DSM Regulations 2026, Revises Deviation Pricing And ESS Provisions

The Central Electricity Regulatory Commission (CERC) has released a draft notification proposing amendments to the Deviation Settlement Mechanism (DSM) Regulations, 2024. The draft, issued on May 26, 2026, introduces the CERC (Deviation Settlement Mechanism and Related Matters) (Third Amendment) Regulations, 2026. These changes are expected to come into effect from July 1, 2026, after the completion of the consultation process.

One of the major changes proposed in the draft regulations relates to the method used for calculating reference prices for deviations. Under the existing regulations, the weighted average Area Clearing Price (ACP) of the Integrated-Day Ahead Market segments is calculated for each individual time block. The amendment proposes replacing this approach with a daily weighted average ACP for the entire day. According to the Commission, this change is intended to simplify the pricing mechanism used for deviation settlement and make the process more streamlined.

The draft regulations also introduce significant provisions for wind and solar power generators. A new clause under Regulation 8 states that deviation charges applicable to Wind and Solar (WS) Sellers will be treated in the same manner as those applicable to General Sellers under specified conditions. This provision will apply to projects awarded through competitive bidding where the tender issuance date or bid submission date is on or after January 1, 2027. For projects not covered under this category, the same treatment will apply if their commercial operation date (COD) falls on or after January 1, 2029.

The Commission has also clarified the treatment of standalone Energy Storage Systems (ESS), particularly pumped hydro storage plants operating under Section 62 of the Electricity Act, 2003. A newly inserted note specifies that deviation charges for such standalone ESS projects will be calculated based on the energy charge rates provided under the CERC (Terms and Conditions of Tariff) Regulations, 2024. This clarification is expected to provide greater certainty regarding the financial settlement of deviations for storage projects.

Another important amendment relates to the injection of infirm power by standalone ESS projects. The draft regulations provide that any infirm power supplied to the grid from the date of first synchronization until the successful completion of the trial run will be eligible for compensation. The payment for such energy will be equivalent to the Normal Rate of Charges for Deviations applicable for each time block. However, the compensation will be capped at a maximum of ₹2.00 per kWh.

The proposed amendments also revise the payment timelines associated with deviation charges. Under the current framework, payments and related financial transactions are required to be completed within ten days from the issuance of the statement by the Regional Power Committee. The draft amendment removes this fixed timeline. Instead, all payments will now be governed by the timelines specified in the Detailed Procedure for the implementation, maintenance, and operation of the National Deviation and Ancillary Services Pool Account.

The draft notification has been signed by CERC Secretary Harpreet Singh Pruthi. It marks the third amendment to the DSM Regulations, 2024, following earlier revisions issued in late 2024 and mid-2025. The proposed changes reflect the Commission’s continued efforts to refine the deviation settlement framework while addressing the evolving requirements of the renewable energy and energy storage sectors in India.