Following the announcement of the fourth amendment to the deviation settlement in November 2018, the Central Electricity Regulatory Commission (CERC) received complaints from several stakeholders regarding technical and operational constraints in implementing some of the provisions. To address these issues, the CERC has issued its fifth draft amendment to the deviation settlement regulations which include two new clauses: daily base deviation settlement mechanism (DSM) and time block DSM.

Daily base deviation settlement mechanism means the sum of charges for deviations for all time blocks in a day payable or receivable excluding the additional charges. Time block DSM indicates the charge for deviation for the specific time block in a day payable or receivable excluding the additional charges.

The draft is up for comments from stakeholders up to May 17, 2019.

Upon its finalization, these regulations will be called the CERC (Deviation Settlement Mechanism and related matters) (Fifth Amendment) Regulations, 2019. These regulations will come into force with effect from the date of notification in the official gazette.

In the draft, the CERC has proposed that the charges for inter-regional deviation and charges for deviation in respect of cross-border transactions will be computed based on the unconstrained market clearing price in Day Ahead Market (DAM).

It also proposed that the charges for deviation in respect of an entity falling in different bid areas will be computed based on the daily average, area clearing price (ACP) of the bid area in which such entity has the largest proportion of its demand.

The CERC has proposed fixing 303.04 paise (~$0.043)/kWh as the upper cap rate for the charges for deviation from the generating stations, irrespective of the fuel type and whether the tariff of such generating station is regulated by the commission or not.

According to the draft, the total deviation from the schedule in energy terms during a day should not be more than 3% of the total schedule for the drawee entities, and 1% for the generators and an additional charge of 20% of the daily base DSM payable will be applicable in case of violation.

The commission has also said that in addition to charges for deviation, an additional charge will be applicable for over injection or under drawl of electricity for each time block when the grid frequency is at least 50.10 Hz at the rates equivalent to charges of deviation corresponding to the grid frequency of below 50.01 Hz (but not below 50.0 Hz), or cap rate for deviation of 303.04 paise (~$0.043)/kWh, whichever is lower.

According to the draft, up to March 31, 2020, if the sustained deviation from the schedule continues for 12 time blocks, the regional entity (buyer or seller), will need to correct its position by making the sign of its deviation from schedule changed or by remaining in the range of +/- 10 MW with reference to its schedule, at least once, latest by the 13th time block. Each violation of the requirement under this clause will attract an additional charge of 10% on the time block DSM that’s payable.

From April 1, 2020, if the sustained deviation from schedule continues for six time blocks, the regional entity (buyer or seller) will correct its position by making the sign of its deviation from schedule changed or by remaining in the range of +/- 10 MW with reference to its schedule, at least once, latest by seventh time block.

Moreover, after April 1, 2019, onwards from first to fifth violation, an additional charge calculated at the rate of 3% of daily base DSM payable will accrue. From the sixth to the tenth violation, an additional charge calculated at the rate of 5% of daily base DSM payable and from eleventh violation onwards, an additional charge calculated at the rate of 10% of daily base DSM will accrue.

The commission has also proposed that the payment of additional charge for any failure to adhere to the sign change requirement will not be applicable to the following: Renewable energy generators which are regional entities, run of river projects without pondage, any infirm injection of power by a generating station prior to the commercial operation date of a unit during testing and commissioning activities, any drawl of power by a generating station for the start-up activities of a unit, any inter-regional deviations, forced outage of a generating station in case of collective transactions on power exchanges.

Prior to this, in November 2018, the CERC had issued the fourth amendment to the deviation settlement regulations which came into effect on January 1, 2019. Through the new proposed amendments, the CERC wants to create a framework seeking to discourage the entities from leaning on the grid to meet their demand-supply gap.