The Central Electricity Regulatory Commission (CERC) has issued the draft Deviation Settlement Mechanism (DSM) and Related Matters Regulations, 2021.

The regulations seek to ensure, through a commercial mechanism, adherence to their schedule of drawal and injection of electricity into the grid, taking care of the security and stability of the grid.

These regulations will apply to all grid-connected regional entities and other entities engaged in the interstate purchase and sale of electricity. The regulations will come into force at a later date which the Commission will notify.

The stakeholders have time until October 10, 2021, to submit their suggestions.

Deviation charges for over-injection and under-injection of power

As per the proposed regulations, for a general seller (other than a run-of-river generating system or a generating system based on municipal solid waste), there will be no charges for deviation up to 2% for over-injection. For deviation beyond 2%, the entity will have to pay deviation charges at 10% of the normal rate for deviation for over-injection. For under-injection, the entity will have to pay deviation charges at the normal rate for up to 2% deviation. Similarly, the generator will have to pay deviation charges at the rate of 110% of the normal rate for deviation beyond 2%.

A seller who is a run-of-river generating station does not have to pay any charges for over-injection. For under injection, the entity will have to pay deviation charges at the normal rate for deviation up to 12% and 110% of the normal rate for deviation beyond 12%.

A run-of-the-river system is a hydro generating system that generates energy in the absence of a large dam or reservoir.

According to the new regulations, the generating station based on municipal solid waste will not have to pay deviation charges for over-injection. For under-injection, the entity will have to pay any charges for deviation up to 20% of the normal rate. For deviation beyond 20%, the entity will have to pay charges at the normal rate for deviation.

Wind and solar power sellers are not required to pay deviation charges for over-injection of power into the grid. For under injection, the sellers will not have to pay any charges for deviation up to 10%. For deviation beyond 10%, the seller will need to pay deviation charges at 10% of the normal rate.

Deviation charges for under and over-drawal of power

Buyers (other than those with a schedule less than 400 MW in the renewable energy-rich states) will not have to pay deviation charges for under drawal. For over-drawal, the entity will pay deviation charges at the normal rate for deviation up to 12%. For deviation beyond 12%, the buyer will have to pay deviation charges at 110% of the normal rate.

Buyers (with a schedule up to 400 MW) are not required to pay any charges for under-drawal. For over-drawal, the entity will have to pay deviation charges at the normal rate for deviation up to 12%, and for over drawal beyond the limit, the entity will have to pay at 110% of the normal rate.

Buyers in renewable energy-rich states will not have to pay deviation charges for under-drawal. For over-drawal, the entity will have to pay at the normal rate for deviation up to 12%, and for over drawal beyond the limit of 12%, the entity will have to pay deviation charges at 110% of the normal rate.

The charges for deviation for drawal of start-up power before commercial operation date of a generating unit or for drawal of power to run the auxiliaries during shut-down of a generating station should be payable at the normal rate of deviation charges.

The charges for inter-regional deviation and deviation in cross-border transactions caused by over-drawal or under-injection will be payable at the normal rate of deviation charges.

The concerned regional entity should pay the due amounts within seven days of the issuance of the statement of charges. A late payment surcharge of 0.04% would be payable for each day of delay.

Any regional entity which at any time during the previous financial year fails to make payment for deviation within the time specified will be required to open a Letter of Credit equal to 110% of their average weekly liability for deviations in the previous financial year within a fortnight from the start of the current financial year.

In case of failure to pay into the ‘Deviation and Ancillary Service Pool Account’ within seven days from the date of issue of statement of deviation charges, the regional load despatch center will be entitled to encash the ‘Line of Credit’ of the concerned regional entity to the extent of the default.

Once these regulations are initiated, the ‘Regional Deviation Pool Account Fund’ constituted under the earlier regulations will be renamed as the ‘Deviation and Ancillary Service Pool Account’ constituted under these regulations.

In June last year, CERC had rescheduled the implementation of the fifth amendment to the DSM. The earlier date for its implementation was June 1, 2020, which was extended to December 1, 2020.

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