Karnataka Notifies New Grid Regulation to Rein in Power Supply Deviations

In a major move to stabilise electricity supply and enhance grid discipline, the Karnataka Electricity Regulatory Commission (KERC) has now notified a new set of rules. The new rules—Karnataka Electricity Regulatory Commission (Intra-State Deviation Settlement Mechanism and Related Matters) Regulations, 2025 mainly deal with the cases of deviations in power supply. 

The state power regulator recently published the new regulations to govern the sector in light of new developments in the power sector in Karnataka. The KERC regulations on aimed at enforcing tighter compliance with power generation and consumption schedules across the state.  Deviation Settlement Mechanism (DSM) rules are regulatory guidelines designed to maintain balance in the power grid by ensuring that electricity generators and consumers stick to their scheduled supply and drawal of power. 

Commercial Discipline for Grid Stability

KERC, in its latest regulation, has proposed a new framework. One of the key features of the regulations is a commercial mechanism that penalises power generators, distribution companies, and consumers for straying from their scheduled injections or drawals. These “deviation charges” are intended to enforce greater accountability among grid participants and protect the system from frequency imbalances that could trigger outages or grid failures.

The rules fall under the broader Intra-State Availability Based Tariff (ABT) regime, a market-based mechanism comprising three components—fixed charges, energy charges, and deviation charges.

Who Must Comply?

The regulations apply to all grid-connected entities across Karnataka, including power generators, transmission and distribution licensees, and open access consumers. Captive power plants and renewable energy projects larger than 5 MW (excluding wind and solar) are also covered.

Deviation charges are specifically applicable to:

• Open access consumers (called single supply consumers or SSCs),

• Generators supplying only to SSCs or licensees outside Karnataka, and

• Entities deviating from approved schedules.

Penalties Based on Frequency and Volume

Deviation charges vary depending on the category of grid user, system frequency, and the magnitude of deviation. For instance, over-injection or under-injection by generators attracts penalties or payouts linked to market-clearing prices and system frequency. Some entities, such as run-of-river hydro plants and waste-to-energy projects, are exempt from frequency-based penalties.

Special provisions also govern start-up power, auxiliary power usage, and forced outages. In the event of grid disturbances or unscheduled curtailments, revised schedules are automatically applied.

Entities found deliberately misrepresenting their availability or drawal can face severe penalties, including cancellation of transactions.

Scheduling and Real-Time Oversight

The State Load Despatch Centre (SLDC) is empowered to oversee scheduling, approve capacity declarations, and issue final day-ahead schedules. Minor changes (below 2% or 0.5 MW) may be rejected to deter frivolous revisions.

In case of transmission constraints or grid emergencies, the SLDC can curtail power flows, prioritising short-term contracts over medium- and long-term ones. If generators inject more than their approved capacity, they forfeit compensation and face additional penalties.

Monthly Settlement and Payment Mandates

Deviation accounts will be issued monthly by the SLDC. A designated State Deviation Pool Account will be used to collect penalties and disburse payouts. Payments must be made within ten days, and recipients are paid within two working days thereafter.

Failure to pay on time incurs a simple interest penalty of 0.04% per day. Repeat defaulters must provide a letter of credit (LC) covering 110% of average deviation liabilities, which can be encashed by the distribution licensee in case of non-payment.