RERC Issues DF/DSM Regulations 2026 with FY 29-30 Targets, Bans Diesel Gensets
RERC introduces DF/DSM framework with FY27 preparatory year, DFPO targets reaching 2 percent by FY29-30, INR 0.20 crore/MW incentives, bans diesel generators, mandates aggregator rules, consumer protection, and open standards.
April 20, 2026. By EI News Network
The regulations introduce a multi-year framework for Distribution Licensees to deploy demand flexibility and DSM measures. A key feature is the designation of financial year 2026-27 as a preparatory year focused on load research and capacity building, with quantified Demand Flexibility Portfolio Obligation (DFPO) targets becoming effective from FY 2027-28.
Under the finalised DFPO trajectory, Distribution Licensees must achieve flexibility equivalent to 0.25 percent of the previous year’s peak demand in FY 2026-27 (preparatory phase), rising to 1 percent in FY 2027-28, 1.5 percent in FY 2028-29, and 2 percent in FY 2029-30. Targets for subsequent years will be notified later. To enforce compliance, the Commission has established a symmetric incentive and disincentive mechanism: licensees will earn INR 0.20 crore for every megawatt achieved in excess of the DFPO target, while facing a penalty of INR 0.20 crore for every megawatt of under-achievement. However, no disincentives will apply during the preparatory first year.
In a significant move to align with clean energy objectives, the RERC has explicitly prohibited fossil-fuel-based diesel generators from qualifying as eligible DF/DSM resources. A proviso added to the definition of 'DF/DSM Resource' and another in the eligible programmes clause strictly exclude DGs. The Commission accepted stakeholder suggestions that diesel gensets defeat the environmental and cost-reduction goals of the regulations.
The final regulations also address aggregator governance and consumer protection. While rejecting a demand for full licensing of aggregators, the Commission has directed Distribution Licensees to issue detailed guidelines for registration, code of conduct, data privacy, grievance redressal, and penalties for non-compliance. Aggregators and Independent Verification Agencies (IVAs) must be separate entities. The Commission has also mandated that consumers have the right to switch between aggregators at no cost, preventing proprietary vendor lock-in. To ensure transparency, licensees must publish load research reports, program portfolios, and EM&V reports on their websites, while protecting consumer load data under the Digital Personal Data Protection Act, 2023.
On the technology front, the RERC has expanded the list of eligible DSM programmes to include Cooling-as-a-Service (CaaS) and integrated Building Management Systems (BMS). The Commission has also mandated open communication protocols such as IEEE 2030.5, OpenADR, and OCCP for EV supply equipment to ensure interoperability. However, a proposal to mandate 20 percent battery energy storage system capacity for all generating systems above 5 kW was rejected for now, with the Commission noting that such requirements are governed by separate regulations and may be considered later.
Regarding cost-effectiveness, the Total Resource Cost (TRC) test remains the primary hurdle, followed by the Ratepayer Impact Measure (RIM) test. The RERC retained the RIM threshold of INR 0.005/kWh (or 0.05 percent of existing tariff, whichever is higher) to protect non-participating consumers from tariff shocks. Avoided power purchase costs will be calculated based on the weighted average of the top 10 percent marginal cost of power purchase from the previous financial year, with a 5 percent year-on-year escalation rate and a discount rate equal to the weighted average cost of capital.
The regulations also mandate that each Distribution Licensee establish a dedicated DF/DSM Cell headed by an officer not below the rank of Chief Engineer, with adequate staffing and functional autonomy. Licensees must work collaboratively with the State Load Dispatch Centre (SLDC) during program development to identify network-constrained zones and forecast system requirements. The first annual DF/DSM portfolio and implementation action plan must be submitted along with the MYT/ARR tariff proposal. With this, the RERC has set the stage for a phased, performance-driven demand flexibility ecosystem in Rajasthan, balancing ambitious targets with preparatory time and consumer safeguards.
please contact: contact@energetica-india.net.
Ravi Rao
Founder and MD
We Aim to Build 5 GW Capacity Across the Entire Solar Value Chain, Says Future Solar's Ravi Rao
Manish Gupta
Director – Technical Sales & Marketing
Solar to BESS: Reliability Begins with Advanced Sealants, Explains Manish Gupta, Fasto Adhesive
Anand Jain
Founder
Anand Jain of Aerem Solutions on Scaling Solar, Storage, and Finance for Sustainable India
Amit Kumar Mittal
CEO
JIRE CEO Amit Kumar Mittal Explains Rising Role of Energy Storage and Green Hydrogen in India
Rajat Shrivastava
General Manager – Marketing
Icon Solar Modules Are Engineered for India’s Harsh Conditions, Says Rajat Shrivastava