The Tamil Nadu Electricity Regulatory Commission (TNERC) has released a draft notification proposing new regulations for the Deviation Settlement Mechanism and related matters in the state’s power sector. The Draft TNERC (Deviation Settlement Mechanism and Related Matters) Regulations, 2026, were issued on May 29, 2026, under Notification No. TNERC/DSM&RM/22. These proposed regulations seek to replace and update the existing 2019 framework in line with the changing requirements of the electricity sector.
TNERC has invited stakeholders, industry participants, and members of the public to submit their comments, suggestions, and objections on the draft regulations. Responses must be submitted in duplicate to the Secretary of TNERC, Chennai, on or before June 13, 2026.
The proposed regulations aim to create a stronger commercial and operational framework that ensures grid-connected buyers and conventional power generating stations follow their approved schedules for electricity generation and consumption. The Commission believes that maintaining discipline in power injection and drawal is essential for ensuring the security, stability, and reliability of the Tamil Nadu power grid.
The draft regulations, however, do not apply to wind, solar, and hybrid renewable energy generating stations. These renewable energy projects are governed by separate regulations because of their unique forecasting and scheduling requirements. Similarly, state-owned energy storage systems and hydroelectric stations associated with irrigation and drinking water projects have been kept outside the scope of the proposed framework due to their dependence on water management priorities.
One of the most significant features of the draft regulations is the introduction of a market-linked deviation settlement framework. The proposal broadly aligns Tamil Nadu’s system with the latest 2024 regulations issued by the Central Electricity Regulatory Commission (CERC). Under the new framework, a “Normal Rate” for deviation charges will be calculated using prevailing market prices discovered through the Integrated Day-Ahead Market (I-DAM), Real-Time Market (RTM), and ancillary service markets. This approach is expected to ensure that deviation charges accurately reflect the actual cost of balancing the power system.
At the same time, TNERC has retained frequency-linked graded charges considering the state’s high share of renewable energy generation. These charges are intended to discourage excessive deviations during periods of grid stress and help maintain system stability.
The draft regulations also introduce strict operational limits. Entities will be required to change the sign of their deviation, from positive to negative or vice versa, at least once every six continuous time blocks. Any violation of this requirement or breach of daily deviation limits will attract an additional penalty of 20 percent over the normal deviation charges. The regulations also empower the State Load Despatch Centre (SLDC) and the Commission to investigate and take action against gaming practices, including deliberate mis-declaration of generation capacity or power schedules for commercial advantage.
For financial administration, the SLDC will manage weekly deviation billing and operate the State Deviation Pool Account. Payments must be made within 10 days of the issuance of statements. Delayed payments beyond 12 days will attract interest at 0.06 percent per day. Repeated payment defaults may require entities to maintain a Letter of Credit to ensure timely settlement of dues.
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