The Central Electricity Regulatory Commission (CERC) has extended the timeline for implementing a key provision under the Deviation Settlement Mechanism (DSM) and Related Matters Regulations, 2024, to address operational and regulatory challenges in managing deficits in the power sector.

The Commission issued the suo-motu order on October 3, 2026. The order was passed by a panel comprising Chairperson Jishnu Barua and Members Ramesh Babu V., Harish Dudani, and Ravinder Singh Dhillon.

The order relates to Regulation 9(7) of the DSM Regulations, 2024, which provides for the settlement of deficits in the Deviation and Ancillary Service (DAS) Pool Account. Under the temporary mechanism currently in place, if a deficit remains after surplus funds from other regions are used, the balance is recovered from drawee Designated ISTS Consumers (DICs).

The recovery is divided equally, with 50% calculated based on drawal at the Inter-State Transmission System (ISTS) periphery and the remaining 50% based on General Network Access (GNA).

A permanent mechanism under Regulation 9(7)(ii) was intended to replace this arrangement. Under the new system, the deficit would be allocated based on the shortfall in reserves allocated to DICs by the National Load Despatch Centre (NLDC).

The permanent mechanism was originally scheduled to take effect from April 1, 2026. Its implementation was later postponed to October 5, 2026. However, Grid-India sought another extension, citing difficulties in developing the Resource Adequacy framework across states.

In its communication dated September 29, 2026, Grid-India highlighted several challenges faced by state entities. These included power shortages during peak demand periods, financial constraints, limited flexibility in operating run-of-river hydro stations and gaps in state-level regulatory frameworks.

Grid-India also pointed to inconsistencies in the collection of reserve capacity data. Only seven of the 34 states and entities had submitted the required declarations. It said effective implementation would require reliable data flows and close coordination between State Load Despatch Centres (SLDCs), Regional Load Despatch Centres (RLDCs) and the NLDC.

After considering the issues, CERC invoked its powers under Regulation 12, which allows the Commission to remove difficulties in implementing the regulations. It decided to extend the existing temporary 50-50 deficit allocation mechanism until April 4, 2027.

As a result, the reserve shortfall-based mechanism under Regulation 9(7)(ii) will now come into effect from April 5, 2027.

CERC has directed Grid-India to speed up preparations and submit a comprehensive procedure for approval before April 4, 2027. The procedure must specify the charge recovery process during pool deficits, the method for calculating reserve shortfalls and the allocation of charges among DICs. With these directions, Petition No. 16/SM/2026 has been disposed of.