What CERC’s latest DSM amendment reveals about how stakeholder concerns become part of regulatory reasoning.
– By Mayuri Singh and Nishant Saxena
One of the more revealing changes in CERC’s latest Deviation Settlement Mechanism (DSM) amendment is one that did not make it into the final regulation.
The draft proposed replacing the existing time-block weighted average Area Clearing Price (ACP) with a daily weighted average ACP for specified open-access and captive transactions. The final notification retained the time-block methodology.
That change says something important about regulatory consultations. A proposal may appear precise on paper, while its commercial, operational and behavioural consequences become apparent only when those affected examine how it would work in practice.
CERC’s third amendment to the DSM Regulations, 2024 followed representations from renewable energy associations and Energy Storage System developers, as well as inputs from Grid India on settlement arrangements. The Commission received 41 submissions on the draft and held a public hearing on 30 June 2026.
The differences between the draft and final versions are therefore more revealing than either document considered alone.
When a pricing formula becomes a question of behaviour
The proposed ACP change concerned a settlement methodology. Its consequences extended to the economic signals available to market participants.
Moving from a time-block methodology to a daily average could smooth intra-day price variation. That raised questions about scheduling behaviour and the signals available to renewable and storage projects whose economics increasingly depend on when electricity has value.
CERC ultimately retained the existing approach. The Commission’s reasoning was closely tied to the purpose of the DSM framework and the role of time-sensitive economic signals in maintaining scheduling discipline.
The distinction is critical. A stakeholder assesses a provision through its effect on project economics, contractual obligations and operational exposure. A regulator must also consider the behaviour that the provision is likely to induce across the system.
A regulatory submission becomes more useful when it connects those two perspectives.
The same concern can produce a different outcome
The treatment of Wind-Solar (WS) Sellers provides a different result.
The final amendment brings future WS Sellers within the deviation treatment applicable to General Sellers. For projects under the bidding route, the provision applies where tendering or bid submission takes place on or after 1 January 2027. For other projects, it applies to projects achieving commercial operation on or after 1 January 2029.
The consultation produced sharply different views. Renewable generators and associations raised concerns about weather dependence, forecasting limitations, balancing resources, and additional deviation exposure. Some sought grandfathering or a longer transition. Others supported alignment, pointing to improvements in forecasting and the increasing share of renewable energy in the generation mix.
CERC retained the provision. The Commission’s reasoning rested on the changing character of the power system. Renewable energy is now a substantial and rapidly growing part of installed capacity and electricity generation. Greater renewable penetration, in CERC’s assessment, makes scheduling discipline and forecasting increasingly important to grid security, balancing, reserves and frequency management.
CERC also distinguished between existing and future projects. Existing projects were conceived, bid out, financed and developed under the regulatory framework prevailing at the time. The prospective treatment of future projects was considered consistent with regulatory certainty while progressively strengthening grid discipline.
The distinction is important. Industry submissions focused on the consequences for individual projects. CERC weighed those consequences against an evolving system-level objective.
Therefore, for a regulatory argument, identifying the commercial consequence is only part of the task. The harder question is why that consequence matters to the regulatory problem.
Influence can also change the shape of a rule
The payment provisions offer a third outcome.
The draft proposed replacing the existing 10-day payment requirement for deviation charges with the timeline specified in the Detailed Procedure governing the National Deviation and Ancillary Services Pool Account.
Stakeholders raised concerns around operational feasibility, verification, de-pooling, invoicing and regulatory certainty. Some sought a longer period; others argued that the 10-day statutory timeline should remain.
The final provision took a more measured form, retaining the statutory framework while allowing the Detailed Procedure to provide for a different timeline subject to Commission approval.
That is another form of regulatory influence.
A consultation does not have to produce the stakeholder’s preferred provision to have affected the final architecture of the rule. Concerns about implementation can shape the safeguards and conditions around a regulatory objective even when the objective itself remains intact.
From regulatory position to institutional reasoning
These three provisions point to a broader feature of regulatory decision-making.
A proposed rule changes something on paper. That change can produce commercial or operational consequences. Those consequences can influence participant behaviour. That behaviour can, in turn, advance or frustrate the regulatory objective.
The ACP discussion brought intra-day price signals and scheduling behaviour into the assessment.
The WS discussion placed project-level concerns alongside the changing requirements of a power system with increasing renewable penetration.
The payment discussion brought the mechanics of verification and settlement into the design of the provision.
This is where regulatory expertise and strategic communication meet. The task is more demanding than making a technical submission clear or persuasive. The substance has to survive the translation from the stakeholder’s commercial reality into the regulator’s institutional frame.
That means understanding how the decision-maker is defining the problem, which consequences are material to that problem, and what evidence can establish the connection.
The stakeholder knows its business. The regulator has to protect the integrity of the system within its statutory mandate. The regulatory argument has to connect the two without losing either the technical substance or the institutional context.
The final notification is only part of the story
This becomes more significant as energy regulation reaches further into project design and commercial decision-making.
The final third amendment to the DSM regulations creates a period in which existing WS Sellers continue under the earlier framework while future projects move towards General Seller treatment. ERC has also recognised the operational complexity where existing WS Sellers with relaxed deviation norms and new WS Sellers subject to General Seller treatment share a pooling station. It has provided for the operational arrangements to be developed by Grid India, with the Commission’s approval, before 1 January 2029.
Storage introduces another set of questions.
The amendment provides specific treatment for infirm power injected by standalone ESS from first synchronisation until successful completion of the trial run, with payment at the Normal Rate of Charges for Deviations subject to a ceiling of ₹2.00/kWh. It also specifies the energy charge rate for deviation settlement of standalone pumped hydro storage plants regulated under Section 62.
CERC has indicated that the PSP provision may be reviewed after two years of implementation experience.
That points to another reality of modern energy regulation: the reasoning does not end with notification. Provisions acquire their full meaning when they encounter contracts, assets, market behaviour, and operational realities.
Parting Thoughts
The CERC consultation produced different outcomes across the proposals: a methodology that was not carried forward, a proposed direction that survived substantial objections, and a provision whose final architecture accommodated greater flexibility.
Together these outcomes suggest a more useful way of thinking about regulatory engagement.
The strongest regulatory argument is rarely the one that states a stakeholder’s position most forcefully. It is the one that makes the stakeholder’s concern relevant to the problem the regulator is actually trying to solve.
What, in your view, separates a submission that is formally considered from one that genuinely influences regulatory reasoning?
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