Central Electricity Regulatory Commission (terms and conditions of tariff) (second amendment) regulations, 2025: Draft notification

Proposed amendments

On December 1, 2025, the Central Electricity Regulatory Commission (CERC) issued a draft notification setting out proposed amendments to the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2024. 

The purpose of these proposed amendments is to integrate provisions for energy storage systems (ESS), especially integrated energy storage systems (IESS) co-located with coal, lignite, gas-based generating stations, or inter-state transmission systems. 

Projects to which the amended regulations would apply

The regulations would apply in a scenario where a large, regulated coal-fired power plant (whose tariff is determined by the CERC) installs a battery energy storage system (BESS) on its premises, or where a transmission licensee operating inter-state transmission system (ISTS) substation identifies a need to enhance grid reliability and manage peak load flows and the installs a BESS at the ISTS substation.

Integrated ESS can help manage peak demand and provide ancillary services such as frequency regulation, among other services. 

The proposed amended regulations do not cover standalone battery energy storage systems (BESS), i.e. where BESS is not co-located or integrated into a generating station or inter-state transmission system. 

Supplementary tariff structure

The amendments set out a supplementary tariff structure for ESS, for which the generation companies or transmission licensees must apply within 30 days following commencement of commercial operation of the ESS. These supplementary tariffs include fixed storage charges (capacity) and energy charges (which will cover the cost of energy required for charging the ESS during charging operation and adjusted for efficiency and auxiliary consumption). 

The fixed storage charges take into account annual fixed costs relating to the ESS, which will cover finance costs and return on equity, as well as O&M expenses which are set at 2 percent of the capital expenditure and escalated at 5.25 percent per annum for the first two years during the first two years of operations of the ESS. 

Key criteria for ESS

The supplementary tariffs are conditional upon certain key criteria that the ESS would need to meet:

• A normative availability factor of at least 90 percent, which is the minimum percentage of time the ESS is expected to be available for operation (i.e. able to deliver stored energy to the grid or beneficiaries).
• A round-trip efficiency of 85 percent, which is a measure of how much energy is obtained from the ESS compared to how much energy is put into it. There are incentives (25 paise/kWh) for excess discharge above the minimum required round-trip efficiency.
• Auxiliary energy consumption of up to 5 percent, which is the electricity used by the supporting systems of the ESS itself (such as cooling, control, battery management, fire protection, etc.), not the energy stored or delivered to the grid.

By specifying how supplementary tariffs (fixed and energy charges) for ESS will be calculated and recovered, the regulations reduce uncertainty for utilities considering investments in energy storage. 

Sharing of financial gains

If a generating company or transmission licensee provides storage services to other generating companies, beneficiaries (e.g. the DISCOMs that have contracted capacity from the generating station or ISTS), or the system operator (for ancillary services or sale in the open market), there may be financial gains. In this case, the net gains (i.e. after covering the supplementary storage charges and energy charges) would be shared equally between the generating company or transmission licensee and the beneficiary (e.g. the relevant DISCOM) based on a 1:1 ratio.

Procedure for dispatch of ESS

Procedures for charging, scheduling, and dispatch are to be prepared by the relevant regional power committee in consultation with the regional load dispatch centre (RLDC), consistent with the Grid Code.

Regulatory sandbox

The regulations also allow for innovation and R&D through a regulatory sandbox for undertaking innovation and research projects in the power sector, with additional costs allowed up to 0.5 percent of annual fixed cost or ₹100 crore, whichever is less. These additional costs would form part of the regulated tariff and recovered from beneficiaries like the other approved costs.