CERC Proposes Revision of Congestion Charge Rate for Real-Time Inter-State Power Transmission

The Central Electricity Regulatory Commission (CERC) has proposed a revised framework for determining congestion charges in real-time operation of the inter-state transmission system, replacing the long-standing fixed charge with a dynamic mechanism linked to the Deviation Settlement Mechanism (DSM) rates.

The  Commission has invited comments and suggestions from stakeholders by April 6, 2026 before taking a final decision. Congestion charges are applied as a commercial tool to relieve transmission constraints and maintain the stability and security of the power grid when demand for transmission capacity exceeds the Available Transfer Capability in the inter-state transmission network. The existing congestion charge mechanism is governed by the CERC (Measures to Relieve Congestion in Real Time Operation) Regulations, 2009, which were notified on December 22, 2009 and came into force on December 24, 2009. These regulations empower the Commission to specify the rate of congestion charge applicable across regions from time to time.

Under the current framework, the congestion charge was fixed at INR 5.45 per kWh through an order issued in March 2010 and has remained unchanged for more than 15 years. The rate was determined based on the difference between the maximum Unscheduled Interchange (UI) charge of INR 7.35 per kWh and the UI charge of INR 1.92 per kWh at the grid frequency of 50 Hz. The Commission had reasoned that fixing the congestion charge slightly higher than this difference would act as a deterrent against excessive drawal by regional entities during grid constraints at frequencies below 50 Hz and would also incentivize the utilization of liquid-fuel-based generation in overdrawing regions to relieve congestion.

The Commission explained that at frequencies below 50 Hz, congestion is typically caused by overdrawing entities in importing regions, while at frequencies above 50 Hz congestion may arise due to under-drawal or excessive injection in exporting regions. In such situations, congestion charges are applied in addition to UI charges to discourage deviations from scheduled drawal or generation that aggravate transmission constraints.

However, CERC noted that the power sector has undergone significant changes since the congestion charge was fixed in 2010. The Unscheduled Interchange mechanism has been replaced by the Deviation Settlement Mechanism, and the electricity market has expanded with the introduction of the Real Time Market in addition to the Day Ahead Market on power exchanges. At the same time, the generation mix has shifted significantly with the rapid growth of renewable energy sources such as solar and wind, which now constitute a substantial share of the national grid.

In light of these developments, the Commission observed that the existing congestion charge framework needs to be reviewed to ensure that it remains effective in managing grid congestion and maintaining operational discipline among grid participants. The review was also prompted by representations from industry stakeholders including the Associated Chambers of Commerce and Industry of India and NTPC Green Energy Ltd..

In its submission, NTPC Green Energy Ltd. highlighted operational challenges faced by renewable energy generators. The company noted that renewable generation is inherently dependent on weather conditions such as solar irradiation and wind speed, making it difficult to ramp up generation during congestion events when the grid operator may require increased injection to relieve congestion.

The company also stated that during non-solar hours, solar plants draw only minimal auxiliary power from the grid and are already subject to DSM and real-time deviation charges for such consumption. It argued that imposing additional congestion charges in such situations could affect the commercial viability of competitively bid renewable energy projects and requested a review of the applicability of congestion charges to renewable energy projects.

Similarly, the Associated Chambers of Commerce and Industry of India submitted that the congestion charge rate of INR 5.45 per unit was determined in 2010 based on the UI Regulations that were in force at that time and has not been revised despite significant regulatory and market developments. The industry body pointed out that renewable energy generation was relatively limited when the regulations were introduced, whereas today solar, wind and hybrid projects contribute a significant share of electricity generation. It also highlighted that renewable generators already face deviation penalties under the DSM Regulations, which allow limited tolerance bands for forecasting errors, and argued that the imposition of congestion charges even within these bands results in a dual financial penalty for the same deviation.

ASSOCHAM further noted that when the congestion charge regulations were introduced, distribution companies and generators did not have mechanisms to procure or balance power in real time. With the launch of the Real Time Market in June 2020, utilities now have the flexibility to procure power during real-time conditions to manage deviations. However, renewable generators are not allowed to procure power from the real-time market to manage under-injection caused by weather variability and also face limitations in revising transmission contracts, leaving them with limited options to respond to congestion events.

The Commission, however, observed that congestion is fundamentally an issue related to grid security and must be addressed collectively by all grid participants. It stated that the congestion charge mechanism is designed to ensure equitable and efficient use of the transmission network under constrained conditions and that exempting renewable energy generators from such charges would undermine the principle of non-discriminatory treatment across entities connected to the grid. According to the Commission, all entities responsible for injection or drawal that contributes to congestion must share accountability irrespective of the source of generation.

To address the changing market structure and regulatory framework, the Commission has proposed a revised congestion charge methodology linked to DSM rates. Under the proposed framework, the congestion charge for a particular time block will be calculated as 1.5 times the applicable DSM base rate, which may be the Reference Charge Rate for conventional generators, the Contract Rate for renewable generators, or the Normal Rate of deviation applicable to buyers.

The Commission has also proposed introducing a minimum and maximum limit for congestion charges. Under the proposal, the congestion charge will have a floor price of INR 3 per unit and a ceiling price of INR 10 per unit. The minimum charge has been proposed to ensure that entities still face a financial signal even if the DSM rate becomes zero due to favorable frequency conditions. At the same time, the maximum cap has been proposed to prevent excessively high congestion charges that could arise in certain operational situations.

CERC stated that fixing the congestion charge at a level higher than the DSM rate will ensure that the combined financial impact of deviation charges and congestion charges acts as an effective deterrent against overdrawal or over-injection during transmission constraints. This mechanism is expected to encourage grid participants to maintain better scheduling discipline and avoid actions that could aggravate congestion in transmission corridors.

The Commission also clarified that congestion charges will not be levied in situations where congestion arises due to forced outages of transmission lines after the drawal schedule has been finalized. In such cases, the system operators including State Load Despatch Centres, Regional Load Despatch Centres and the National Load Despatch Centre will issue emergency operational instructions to the concerned entities to relieve congestion in the interest of grid security.

To provide clarity on the proposed methodology, the Commission has included illustrative examples showing how congestion charges would be calculated for different categories of entities including renewable generators, conventional generators and buyers under various deviation scenarios and frequency conditions. These examples demonstrate how the revised formula would apply in real-time grid operations.

The Commission has invited stakeholders to submit their comments and suggestions on the proposed revision by April 6, 2026. It has also directed that the matter be notified for a public hearing before the final congestion charge framework is determined.

The proposed revision of congestion charges is expected to have significant implications for power generators, distribution companies and renewable energy developers, as the charges serve as an important economic signal influencing real-time grid behavior and the efficient use of the transmission network.