The Central Electricity Regulatory Commission (CERC) has issued regulations for Power System Development Fund (PSDF), which will come into effect from the date of their publication in the Official Gazette.

According to the CERC notification, the fund would be created by credits received from a variety of charges collected which include congestion charges that are in surplus after the amounts are paid to the eligible regional entities along with interest if any, according to the Congestion Relief Regulations.

Congestion amount realized from the difference in the market prices of different regions because of market splitting in power exchanges as per power market regulations will also be credited to the PSDF.

Surplus deviation settlement charges after payments made to the Regional Deviation Pool Account Fund against final settlement of claims according to the Deviation Settlement Mechanism Regulations will also be credited to the PSDF.

Other charges like reactive energy charges and additional transmission charges arising out of the explicit auction process in short-term open access advance bilateral transactions according to the CERC (Open Access in inter-State Transmission) Regulations, 2008 will be pooled into the power system development fund.

The notification further states that the PSDF will be maintained and operated through the Public Account of India.

Regarding the utilization of the PSDF, the funding for projects from PSDF to the entities should be in the form of grant, and the grant amount would be reduced from the capital cost of the project.

The CERC has further proposed that the PSDF be utilized for funding transmission infrastructure projects in response to feedback by the Load Despatch Centers to relieve congestion in interstate and intrastate transmission systems affecting the inter-state transmission systems (ISTS).

The fund will also be utilized for the installation of shunt capacitors, series compensators and other reactive energy generators for improvement of voltage profile in the grid.

It also proposes renovation and modernization of transmission and distribution systems for relieving congestion.

Regarding the approval of funds from PSDF, the CERC states that the central government may frame procedures or guidelines, either directly or through the nodal agency, for application, processing, sanction, disbursal, appraisal and monitoring of funds from PSDF.

The government has been investing in the development of transmission infrastructure, and the Budget 2019 had allocated ₹10.35 billion (~$150 million) for the power system development fund.

Mercom had earlier reported how on the lack of transmission infrastructure is a growing concern for solar, and wind companies.