CERC issues draft Deviation Settlement Mechanism and related matters – fifth amendment, regulations, 2019
CERC recently notified draft DSM & related matters amendments after MSEDCL, MPPMCL, & WBSEDCL filed a petition before the Delhi High Court challenging the legality & validity of certain provisions on the DSM 4th amendments, regulations 2018 which were notified in November 2018 & came into effect from 1st January 2019.
According to the petition, there were issues pertaining to the operation of clauses 7(1), 7(10) & 7(11a). Post-hearing of the petitions & examining it, the Commission proposed these amendments, the highlights of which are as below:
Issue: Sign change norms in case of sustained deviation and imposition of additional surcharge for such violation under Regulation 7(10) and 7(11)(a)
The commission in the DSM (4th amendment) regulations, 2018, provided for 6th time blocks for change of sign in case of sustained deviation in one direction. Similarly, a new proviso was added to regulation 7(10), which specifies the additional surcharges of 20% of the daily base DSM payable/receivable to be levied for each violation of sign change norms.
Post receiving comments from various stakeholders, the commission suggests creating a framework seeking to discourage the entities from leaning on the grid to meet their demand-supply gap.
Amendment – Regulation 7 (10): “In the event of sustained deviation from the schedule in one direction (positive or negative) by any regional entity (buyer or seller), such entity shall correct its position in the manner as specified under clauses (a) and (b) of this Regulation.”
(a) Up to 31.03.2020, if the sustained deviation from schedule continues for 12 time blocks, the regional entity (buyer or seller), shall 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 by13th time block.
Provided that each violation of the requirement under this clause shall attract an additional charge of 10% on the time block DSM payable/receivable as the case may be.
(b) From 01.04.2020, if the sustained deviation from schedule continues for 6 time blocks, the regional entity (buyer or seller), shall 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 7th time block.
In case of the above violations occur additional charges will be applied as below:
| No. of violations in a day | Additional Charge Payable |
| From first to fifth violation | For each violation, an additional charge @ 3% of daily base DSM payable / receivable |
| From sixth to tenth violation | For each violation, an additional charge @ 5% of daily base DSM payable / receivable |
| From eleventh violation onwards | For each violation, an additional charge @ 10% of daily base DSM payable / receivable |
Counting of the number of sign changes violations under clauses stated above will start afresh at 00.00 Hrs. for each day.
These charges will not be applicable to:
- Renewable energy generators which are regional entities
- Run of river projects without pondage
- Any infirm injection of power by a generating station prior to CoD of a unit during testing and commissioning activities, in accordance with the Connectivity Regulations.
- Any drawal of power by a generating station for the start-up activities of a unit.
- Any inter-regional deviations.
- A forced outage of a generating station in case of collective transactions on Power Exchanges.
Amendment: In order to implement these amendments two new definitions have been included in Regulation 2, clause (1) sub-clause (gb) & (qa):
“(gb) “Daily Base DSM” means the sum of charges for deviations for all time blocks in a day payable or receivable as the case may be, excluding the additional charges under Regulation 7”.
“(qa) “Time Block DSM” means the charge for deviation for the specific time block in a day payable or receivable as the case may be, excluding the additional charges under Regulation 7”
Issue 2: Daily Deviation limit and the additional charge for its violation under Regulation 7(1)
The Commission has specified through the 4th amendment to DSM Regulations a daily volume limit of 3% of the total schedule for the drawee entity and 1% for the generators for deviation from the schedule in energy terms during a day. In addition to this, an additional charge of 20% of the daily base DSM payable/receivable for such violation was prescribed.
The commission is of the view, that countries like Europe & the United States of America have a very narrow range in order to ensure quality power supply to consumers and maintain good infrastructure. Similarly, it is necessary on the part of utilities to comply with the policy instructions of the government so as to secure adequate generation resources in different time zones to meet demand, rather than simply relying on the grid providers of reserves.
However, since the timeline of this implementation is not immediate, Regulation 7 (1) is deleted.
“Provided also that from a date not earlier than one year as may be notified by the Commission, the total deviation from schedule in energy terms during a day shall not be in excess of 3% of the total schedule for the drawee entities and 1% for the generators and additional charge of 20% of the daily base DSM payable/receivable shall be applicable in case of said violation.”
Issue: Clarification on the Area Clearing Price (ACP) in case of inter-regional and international exchange and clarification with respect to the applicability of cap rate for various types of fuel plants.
The Commission is of the view that DSM charges for an entity falling in different bid areas should be computed based on the daily average ACP of the bid area in which the entity has the largest proportion of its demand. Similarly, the charges for inter-regional deviation and cross-border and for deviation in respect of cross-border transactions should be computed on the basis of the unconstrained market clearing price in Day-Ahead Market.
Also, the Cap rate for the charges for deviation for the generating stations, irrespective of the fuel type and whether such generating stations are regulated by the Commission or not, will not exceed 303.04 Paise/kWh. The Commission has decided to continue with the already available reference of 303.04 Paise/kWh.
Further, it is proposed to discourage over-injection during high grid frequency, a generating station should not be paid for over-injection if the frequency is between 50.05 Hz and 50.10 Hz, and any over-injection when the grid frequency is 50.10 Hz and above, will attract the payment of DSM charges equivalent to frequency at 50 Hz or the cap rate of 303.04 Paise/kWh whichever is lower.
The public hearing for the draft regulation amendment is scheduled to take place on 22nd May 2019.