TNERC Issues Draft Amendment to Deviation Settlement Mechanism

The Tamil Nadu Electricity Regulatory Commission (TNERC) has issued a draft amendment to the Tamil Nadu Electricity Regulatory Commission (Deviation Settlement Mechanism and Related Matters) Regulations, 2019.

This amendment seeks to address the challenges posed by the rising penetration of renewable energy (RE) and the uncertainties in both generation and electricity demand. It focusses on improving grid discipline by regulating the schedules and drawal of electricity by both sellers and buyers connected to the intra-state transmission system or distribution network.

It proposes changes regarding the application of the Deviation Settlement Mechanism (DSM) to buyers and sellers engaged in electricity transactions via Open Access. Under the proposed changes, the DSM will apply to all sellers, including Open Access Generating Stations and State-owned Generating Stations.

However, it will exclude renewable energy sources such as wind, solar, and State-owned hydro Generating Stations, including run-of-river projects connected to the intra-state transmission or distribution system.

Furthermore, the DSM will also apply to all buyers, including Distribution Licensees, deemed Distribution Licensees, and full Open Access Consumers connected to the intra-state transmission system or distribution system. It is important to note that these Regulations will be extended to all Open Access consumers at a later date, as may be notified by the Commission.

The amendment aims to strengthen grid discipline by removing the cap rates on deviation charges and aligning the regulations with national standards. It has been prompted by recent developments, including the need to eliminate cap rates on deviation charges as per a TNERC order issued in August 2024. This is seen as a necessary step to protect the interests of the Distribution Licensee and consumers while also enhancing grid security. By linking the DSM with market prices, it is anticipated that grid discipline will improve, and the frequency band can be more tightly controlled, reducing the risk of grid separation and instability.

Furthermore, the draft amendment also excludes hydro power plants from the DSM framework, recognising their role as spinning reserves for irrigation and operation under the direction of the State Load Dispatch Centre (SLDC). This exclusion aligns with earlier TNERC orders exempting hydro plants from DSM charges.

The amendment also aligns with national efforts to enhance grid security and operational efficiency, including proposed changes to the State Grid Code. The TNERC has indicated that, based on the implementation experience of these regulations, a review will be undertaken to further align the Tamil Nadu regulations with the Central Electricity Regulatory Commission (CERC) guidelines.

Stakeholders are invited to submit their feedback on the draft amendment by November 1, 2024. The TNERC has emphasised that the final regulations will incorporate the views of all stakeholders to ensure the safe, secure, and reliable operation of the grid.