KERC Introduces Draft Intra-State Deviation Settlement Mechanism and Related Matters Regulations, 2024

Posted On - 4 November, 2024 • By - King Stubb & Kasiva

Introduction

The Karnataka Electricity Regulatory Commission (KERC) introduced the Draft Intra-State Deviation Settlement Mechanism and Related Matters Regulations, 2024 to enhance grid stability and ensure that electricity generators and consumers adhere strictly to their scheduled power generation and consumption.[1] This regulation aims to streamline the process of settling deviations from the prescribed power schedules, thereby maintaining the reliability and security of the electricity grid in Karnataka. It affects all intra-state entities connected to the State Transmission Utility (STU), including power generators, distribution companies, and open access consumers.

Explanation (Key Points)

1. Objective and Applicability

    The primary goal of the regulations is to create a commercial mechanism that ensures grid users do not deviate from their scheduled electricity drawl and injection. The regulation applies to all intra-state entities, including state-owned power stations, conventional fuel-based plants, renewable energy plants, captive generating plants, and distribution licensees. It also includes consumers who engage in open access transactions and entities selling power to consumers outside the state.

    2. Deviation Settlement Mechanism (DSM)

      The regulation introduces the Deviation Settlement Mechanism (DSM), which governs how deviations from the scheduled power generation and consumption will be settled. It establishes deviation charges based on a formula that considers factors such as the actual power injected or drawn compared to scheduled amounts. Deviation charges are imposed on entities that overdraw or underdraw power beyond specified limits. The charges vary depending on whether the frequency of the grid is within a specified band (49.90 Hz to 50.05 Hz). The DSM also lays down rules for unscheduled power injections and how such deviations are to be compensated.

      3. Components of Tariff under Availability Based Tariff (ABT)

      • The regulation maintains the three-part tariff structure under the ABT system:
      • Fixed charges/capacity charges based on the declared availability of power generation.
      • Energy/variable charges for the scheduled amount of energy, irrespective of actual consumption.
      • Deviation charges calculated for differences between scheduled and actual generation or drawal.
      • Deviation Charges and Frequency Linkage

      4. Deviation Charges and Frequency Linkage

        Deviation charges are directly linked to grid frequency, incentivizing participants to maintain balance. The closer the frequency is to the optimal range (49.90 Hz to 50.05 Hz), the lower the deviation charges. Charges increase as the frequency deviates, ensuring that grid participants have a strong financial incentive to follow their schedules.

        5. Open Access and Consumer Implications

          Open access consumers and captive users are also bound by the deviation settlement rules. For these users, the deviation charges will be calculated based on the actual drawal from the grid against their contracted schedule. Excess drawal will be settled at the applicable DSM rates, and in cases of underdrawal, consumers will be compensated based on the DSM rules.

          6. Energy Accounting and Settlement

            The regulation outlines the processes for energy accounting and settlement of deviation charges. The Karnataka State Load Despatch Centre (SLDC) is responsible for maintaining and issuing the State Deviation Settlement Mechanism Account (SDSMA). The settlement of charges will occur weekly or monthly, depending on the category of the generating station or consumer. A State Deviation Pool Account is established for collecting and distributing these charges.

            7. Compliance and Penalties

              Strict provisions are included for ensuring compliance. Entities that fail to settle their deviation charges on time will incur penalties, including interest charges and the requirement to open a Letter of Credit (LC) for future transactions. Non-compliance could result in further punitive measures, including disconnection from the grid.

              Conclusion

              The KERC’s Draft Intra-State Deviation Settlement Mechanism and Related Matters Regulations, 2024 is a forward-looking step aimed at enhancing the reliability and security of Karnataka’s electricity grid. By imposing strict adherence to scheduled power generation and consumption, the regulation minimizes grid disturbances and ensures equitable settlement of deviations. The regulation emphasizes frequency-linked deviation charges and mandates the establishment of the State Deviation Pool Account to streamline payments and settlements, thereby ensuring a stable, efficient, and predictable power supply environment in the state.

              [1] https://kerc.karnataka.gov.in/uploads/media_to_upload1727331377.pdf