The Central Electricity Regulatory Commission (CERC) has proposed revising the methodology for determining congestion charges in real-time interstate transmission.

The Commission has invited comments and suggestions from stakeholders by April 6, 2026.

Under the proposed framework, congestion charges would no longer be fixed but instead calculated dynamically as 1.5 times the applicable deviation settlement mechanism (DSM)-based rate for a given time block.

Depending on the entity and the nature of deviation, this base rate could be the reference charge rate, the contract rate, or the normal rate specified under the DSM Regulations.

The Commission has proposed a minimum congestion charge of ₹3 (~$0.0324)/kWh and a maximum of ₹10 (~$0.108)/kWh, thereby introducing both a floor and a ceiling to the pricing mechanism.

Congestion charges are applied as a commercial tool to maintain grid stability by discouraging entities from deviating in ways that strain transmission corridors.

Under the existing framework, these charges have remained at ₹5.45 (~$0.0590)/kWh since 2010. This rate was originally determined based on the difference between the maximum Unscheduled Interchange (UI) charge of ₹7.35 (~$0.0795)/kWh and the UI charge of ₹1.92 (~$0.0207)/kWh at a system frequency of 50 Hz, with the intent of discouraging overdrawal at lower frequencies and incentivizing alternative generation sources.

The Commission has now observed that the assumptions underlying this framework no longer hold. Over the past 15 years, the electricity sector has undergone substantial transformation, including the replacement of the UI regime with the DSM Regulations, 2024, a sharp increase in renewable energy capacity, and the introduction of market-based mechanisms such as the Real-Time Market alongside the Day-Ahead Market.

In light of these developments, CERC concluded that the existing congestion charge rate requires a revision to remain effective in managing grid conditions.

The rationale for linking congestion charges to DSM rates is to ensure that the combined financial impact of deviation and congestion charges is sufficiently high to act as a deterrent against grid stress, particularly in situations of overdrawal at frequencies below 50 Hz. At the same time, the introduction of a minimum charge addresses situations where DSM rates may be negligible or zero, while the ceiling ensures that charges remain within reasonable bounds.

The order reiterates that congestion charges will continue to apply to entities responsible for congestion through overdrawal, under-drawal, over-injection, or under-injection, and will be levied in addition to DSM deviation charges. The determination of which entity is responsible for congestion remains linked to system frequency, with overdrawal in importing regions typically causing congestion at frequencies below 50 Hz, and excess injection or under-drawal in exporting regions contributing to congestion at higher frequencies.

At the same time, the Commission has retained an important exception, which is that congestion charges will not be levied where congestion arises due to forced outages in transmission corridors after schedules have already been finalised. In such cases, grid operators such as the various load dispatch centres are expected to manage the situation through operational instructions in the interest of grid security.

The proposal follows representations from stakeholders who sought a review of the applicability of the congestion charge to renewable energy generators. These stakeholders argued that renewable generation is inherently variable, that DSM regulations already provide certain relaxations for renewable deviations, and that the imposition of congestion charges could result in double penalisation.

The CERC, however, refused to exempt renewable energy generators from congestion charges. It emphasized that congestion is fundamentally an issue of grid security and that all entities contributing to it must be treated uniformly. Exempting any category of generators would undermine the principle of non-discriminatory treatment and weaken the effectiveness of congestion management as a system operation tool.

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