CERC Advances Tariff Reforms, Market Development and Renewable Integration to Strengthen India's Power Sector in FY25

CERC Advances Tariff Reforms, Market Development and Renewable Integration to Strengthen India's Power Sector in FY25

The Electrical Post

New Delhi: The Central Electricity Regulatory Commission (CERC) undertook a series of significant regulatory reforms and strategic initiatives during FY 2024-25, reinforcing its role in shaping India's evolving power sector and supporting the country's long-term energy transition objectives. Presenting the Commission's Annual Report 2024-25, Chairperson Shri Jishnu Barua described the year as a defining period marked by comprehensive policy interventions, tariff reforms, market development measures and regulatory innovations aimed at enhancing efficiency, transparency and sustainability across the electricity sector.

A major milestone during the year was the introduction of the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2024, which will govern tariff determination for the 2024-29 control period. The regulations represent one of the most important reforms in tariff governance in recent years and incorporate prudent expenditure recognition mechanisms, revised return on equity norms and risk-based approaches for generation and transmission assets. According to the Commission, the new framework seeks to balance investor confidence with consumer interests while encouraging operational efficiency and financial discipline across the sector.

Particular emphasis was placed on promoting hydropower development through innovative incentive structures. The revised tariff regulations introduced special incentives for hydroelectric projects, including run-of-the-river schemes and pumped storage projects, reflecting the growing importance of flexible generation resources in supporting renewable energy integration. The move is expected to improve the financial viability of hydro assets while strengthening grid reliability as India increases its dependence on variable renewable energy sources.

The Commission also focused extensively on enhancing the transparency, competitiveness and efficiency of India's electricity markets. During the year, CERC initiated measures to strengthen power market design and proposed structured mechanisms for Virtual Power Purchase Agreements (VPPAs). These initiatives are intended to improve market liquidity, facilitate broader participation, reduce transaction risks and provide greater flexibility for both electricity buyers and sellers. The regulatory framework is expected to support the development of innovative procurement models while encouraging corporate participation in renewable energy markets.

Transmission sector reforms remained another key area of focus. CERC issued the draft Third Amendment to the Connectivity and General Network Access (GNA) Regulations, introducing important changes aimed at optimizing the utilization of the national transmission network. The proposed amendments redefine transmission access requirements during solar and non-solar hours, enabling more efficient use of transmission assets and encouraging the deployment of energy storage systems. The reforms also seek to rationalize bank guarantee requirements and incentivize developers to take timely decisions regarding project implementation.

The Commission stated that these measures would ensure equitable sharing of network costs while facilitating faster integration of new generation projects into the inter-state transmission system. As India rapidly expands its renewable energy capacity, transmission planning and access reforms are becoming increasingly critical to ensure seamless evacuation of power and avoid infrastructure bottlenecks.

FY25 also marked a significant achievement for India's renewable energy sector, with the country surpassing 175 GW of installed renewable energy capacity. CERC's regulatory interventions played an important role in supporting this growth trajectory through the creation of market-based mechanisms and compliance frameworks that provide greater flexibility to obligated entities. The Commission continued to refine Renewable Energy Certificate (REC) regulations and introduced amendments designed to improve the functioning of renewable energy markets.

In addition, the regulator strengthened the policy framework for hybrid renewable projects and storage-integrated energy systems. These initiatives align with India's broader energy transition strategy, which increasingly relies on a combination of solar, wind, storage and flexible generation resources to meet rising electricity demand while advancing decarbonization objectives. By supporting hybrid and storage projects, the Commission aims to facilitate round-the-clock renewable energy supply and improve grid stability.

Beyond regulatory reforms, CERC continued to play a crucial adjudicatory role in resolving disputes and maintaining market discipline. During FY25, the Commission adjudicated several landmark petitions involving tariff issues, transmission cost-sharing arrangements, deviation charges and compliance matters. The regulator prioritized timely resolution of long-pending disputes related to transmission costs and cases arising under the Deviation Settlement Mechanism (DSM), thereby improving regulatory certainty and strengthening investor confidence.

The Commission noted that all proceedings were conducted with transparency, procedural rigor and stakeholder participation. By clarifying market practices and enforcing accountability among sector participants, CERC contributed to the development of a more robust and predictable regulatory environment. Such efforts are increasingly important as the power sector attracts large-scale investments in renewable energy, transmission infrastructure and emerging technologies.

Digital transformation also emerged as a key focus area during the year. CERC enhanced its e-governance capabilities through improvements in online petition filing, case monitoring and stakeholder interaction systems. These initiatives have streamlined regulatory processes, improved accessibility and increased transparency in decision-making. The Commission further encouraged stakeholder engagement through public hearings, consultations on draft regulations and various industry forums, ensuring that policy development remains participatory and responsive to emerging sector needs.

Financial oversight continued to be an important aspect of the Commission's mandate. CERC exercised prudent supervision over project costs, investment approvals and expenditure reviews, seeking to balance infrastructure development requirements with cost containment objectives. The regulator closely monitored expenditure efficiency across projects while ensuring that critical investments in grid modernization, transmission expansion and generation infrastructure remained on schedule and within approved budgets.

According to Shri Jishnu Barua, the cumulative impact of these initiatives has been the creation of a more inclusive, responsive and well-informed regulatory framework capable of supporting India's rapidly evolving power sector. He emphasized that the Commission's efforts during FY25 were guided by the dual objectives of ensuring reliable and affordable electricity while facilitating innovation, investment and sustainability.

Looking ahead, the Chairperson noted that the Commission remains committed to supporting cost optimization, grid reliability and India's broader energy transition goals, including the country's long-term net-zero ambitions. The reforms introduced during FY25 are expected to serve as catalysts for future regulatory innovation and market development. As renewable energy penetration continues to increase and new technologies such as energy storage, green hydrogen and advanced grid management systems gain prominence, the role of a strong and adaptive regulatory framework will become even more critical.

Shri Barua highlighted that the Electricity Act, 2003 has significantly expanded the responsibilities of CERC beyond tariff determination. While the Commission's predecessor under the CERC Act, 1998 was primarily responsible for tariff fixation, the current legislative framework entrusts CERC with a much broader mandate. These responsibilities include licensing of inter-state transmission and trading entities, regulation of licensee performance, monitoring compliance with regulatory standards, facilitating competition and ensuring the orderly development of electricity markets.

The Chairperson reiterated that the continued cooperation of utilities, generators, transmission companies, market participants, policymakers and consumers will remain essential for achieving India's energy objectives. With regulatory reforms, market modernization and renewable energy integration gathering pace, CERC believes the Indian power sector is entering a new phase characterized by greater efficiency, resilience and sustainability. The Commission's actions during FY25 have laid a strong foundation for this transformation, positioning the sector to meet growing electricity demand while supporting the country's economic development and clean energy aspirations.
 

Published at : Sep 07, 2026 06:44 AM (IST)

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