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Policies & Regulations > DSM Regulations |
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Draft DSM Regulations
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Institutionalising EEDSM |
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DSM Regulations
Draft DSM Regulation of MERC
Maharashtra Electricity Regulatory Commission (MERC) has come out with draft DSM
regulation in the state of Maharashtra. A regulatory framework provides the much
needed impetus to the DSM initiatives in the State by elaborating upon MERC’s policies
and procedures about the administration and delivery of the DSM in Maharashtra,
including detailed elaboration of MERC’s DSM programme eligibility and selection
criteria; roles and responsibilities of various stakeholders in the DSM activity;
DSM plan/programme funding arrangements; DSM plan/programme targets and budgets;
process and procedures for submission, appraisal, approval, monitoring, evaluation
and reporting of DSM programmes; as well as guidelines with respect to DSM plan
preparation, DSM programme design, evaluation and monitoring, etc.
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Key Objectives of MERC DSM Policy:
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Lowering the overall cost of electricity to the consumers (greater operational and
economic efficiency and economical use of resources) Reducing/differing the need for generation, transmission, and/or distribution capacity
additions Creating consumer awareness about the need for energy efficiency (why) and how and
where consumers can save energy Reducing the environmental damage by reducing the emission of green house gases
Encouraging the emergence and development of energy service companies (ESCOs)
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DSM Guiding Principles:
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Pertaining to energy short situation in the state, emphasis will be placed on quick
acting resource acquisition type DSM programmes. DSM programmes that give lasting savings – new buildings, new appliances (life of
10-25 years, instead of CFL types that have short life) will be preferred. Encouragement will be given to DSM program designs that provide sustainable benefits
(market transformation) like, Enhance target consumer interest and inclination in adopting energy efficiency,
i.e., not only removes perceived barriers but goes beyond and motivates consumers
to adopt energy efficiency Enhance the interest and the willingness of the intermediaries such as
the banks to lend for energy efficiency , and Enhance emergence or development of sustainable energy delivery entities
The DSM programmes taken up for implementation are cost effective, i.e. pass the
TRC test (efficiency), As far as possible, the DSM programmes taken up for implementation do not put undue
burden on non-participants, i.e. pass the RIM test As far as possible, DSM programmes are implemented for all segments or consumer
categories Well defined framework for DSM exists and that clarity of purpose,
process, procedures
and roles exists (effectiveness) Transparency exists in all DSM processes, including DSM plan/programme design, approval,
appraisal, evaluation and monitoring (effectiveness) To an extent possible, “extensive stakeholder consultation” will be an integral
part of all DSM related work in the State (effectiveness, equity) DSM programmes to supplement National level efforts, For Ex. DSM programmes to promote/incentivise
purchase of five star appliances, DSM programmes to compliment national level initiatives
to promote CFLs (Bachat Lamp Yojana) or promote energy efficiency in agriculture
and municipal water pumping, The Commission will make resources available for design, development and implementation
DSM programmes which may be socially highly desirable but may not effectively pass
the conventional cost effectiveness criteria. Preference will be on “market driven” approach to DSM portfolio selection rather
than on “technology driven” approach,
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DSM Programmes Eligibility Criteria:
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MERC Supports to the DSM Programs
That promote or lead to efficient utilisation of electricity (EE) in various end-uses
and processes and accelerate penetration or adoption of energy efficient and/or
energy conserving appliances, equipment, devices, processes, practices and behaviour;
and/or DSM programmes that promote peak load management (clipping or shifting of peak load
to off-peak periods) or in the nature of demand response (DR); and/or DSM programmes that promote or lead to fuel substitution - substitution of electricity
with other fuels/forms of energy, including renewable energy, oil, gas or coal Promote or lead to efficient utilisation of electricity or load management or fuel
substitution along with distribution improvement. Promote or lead to deferment of new distribution capacity (new lines, net work,
substation or transformer upgrades,
etc.) Promote consumer awareness and education about why, how, when and where of energy
efficiency and include activities such as energy audits, awareness campaigns, training,
demonstration projects, etc.
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DSM Programmes Eligibility Criteria:
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Focus will not be on individual programmes but portfolio of DSM programmes, referred
to collectively as DSM Plan. MERC to opt for change over from the existing individual
DSM programme based approach to future multi-year DSM plan based approach. The present
individual DSM programme based approach for capturing demand side resource will
continue till the end of year two of the next multi-year tariff term, i.e. till
the end of year 2011-12.
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Roles and Responsibilities:
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DSM Activities for Regulators:
Determining overall DSM policy direction, goals and priorities Development and issuance of guidelines and regulations for DSM administration
Regulatory framework for DSM DSM Plan preparation guidelines DSM plan requirements’ regulations DSM programme design guidelines DSM programme requirements’ regulations DSM plan and programme cost effectiveness assessment regulations DSM Plan and individual
programme level reporting requirements’ regulations/guidelines
DSM Plan level & individual programme level monitoring requirements’ regulations/guidelines
DSM Activities For Utility:
Load research & consumer survey Load forecasting and forecasting of load profiles Conduct of DSM and Demand Response Potential Studies Integrated resource planning (IRP) exercises Setting short- and long-term DSM targets (e.g., kWh, MW) DSM Plans: Preparation , Appraisal, Approval, Plan level Monitoring, DSM Plan level
reporting, Plan level Evaluation, measurement and verification DSM Programmes: Design of Programmes, Preparation of DSM Programme Document, Appraisal,
Approval, Individual programme level Monitoring, DSM individual programme level
reporting, Individual programme level Evaluation, measurement and verification Annual work plan
DSM Budgets: Preparation of yearly budgets, Scrutiny and examination of yearly budgets,
Approval of yearly budgets DSM programme level dispute resolution Development of DSM related centralised information system and data base to aid DSM
planning, programme design, cost effectiveness assessment, EM&V
Inventory of DSM programmes, costs, achievements, lessons learned DSM measure wise estimation of deemed savings, costs and timing Avoided costs – generation, transmission and distribution
Maintenance of DSM related centralised information system and data base Research and analysis in support of :
Development of data base and information system; Development of guidelines/regulations Conduct of potential studies Development of innovate Tariff offerings to foster energy efficiency Refinement, adjustment and development of DSM policy goals, priorities, targets,
funding levels, etc.
Development of DSM programmes that are socially highly desirable but otherwise do
not meet the conventional cost effectiveness criteria, and approval of funding arrangement
and funding for such programmes
DSM Administrative Structure under Multi- Year DSM Planning Regime:
DSM administration structure in the State is to be strengthened by creating and
assigning specific role to the following two entities,
Inter-Utility Working Group (IUWG), and
DSM Consultative Committee (DSM-CC)
It is envisaged that the above two entities, together with the major existing players,
i.e. MERC, the distribution licensees and the Consumer Representatives (CRs), will
be the key players in the administration and management of the DSM effort in the
State in future.
Roles of Different Stakeholders:
MERC - to provide overall policy direction and oversight to the DSM effort in the
State.
Distribution Licensees - to develop, design, and implement DSM programmes / programme
portfolio.
The DSM –CC – will play an advisory role and will mainly assist the Commission in
its policy direction and oversight work.
The IUWG - will facilitate the DSM effort in the State and it is envisaged that
it will be involved in both, the developmental and the operational work.
The CRs - will continue to provide comments and suggestions on the DSM programmes
and programme portfolios, but they will also play an expended role of assisting the Commission (as part of DSM-CC) in policy direction and oversight work
DSM Funding, Targets and Budgets
The utility’s overall rates, i.e. the DSM funds requirement/budget is included in
the utility’s annual revenue requirements (ARR)
Three approaches that could be adopted by MERC are,
Set DSM targets in kWh and or kW terms and then make the necessary resources available
through the ARR, irrespective of the level of resources required. Set the funding level and then identify most optimal portfolio of cost effective DSM programmes that can be accommodated within the available funding and the DSM
target then becomes the aggregate of savings expected from all programmes in the
“optimal” portfolio. Set DSM targets in kWh/kW terms, but also
set a cap on the funding level that will
be made available for meeting the target. Since there will be a cap on the funding
level available for DSM, this approach will ensure that the consumers are not unnecessarily
burdened due to DSM.
However to avoid unacceptable burden to the consumers third option is appropriate
It is proposed that annual funding level for DSM be capped at 1.5% of the annual
revenue of the respective distribution licensee.
Annual DSM budgets and targets, determined and approved at the beginning of the
planning cycle will be revisited during the Annual Performance Review essentially
to see if any refinements and adjustments are required to these budget and target
figures approved at the beginning of the planning cycle) on account of changes,
if any, in market conditions and learning.
For DSM administrative activities other than DSM plan/programme implementation,
it is proposed that the funding be capped at the level of 15% of the funding level
for DSM plan/programme implementation (which has been proposed to be capped at 1.5%
of the distribution licensee revenues).
For Consumer awareness, Equity and Sustainable Benefits, it is proposed that between
10% (at the minimum) and 20% (at the maximum) of the total funding for DSM Plan/Programme
implementation be reserved for following types of DSM programmes:
Market transformation (see definitions section) DSM Programmes DSM Programmes that promote consumer awareness and education about why, how, when
and where of energy efficiency and include activities such as: DSM Programmes for “hard to reach” (see glossary section) consumers DSM Programmes for consumers below poverty line/consumers consuming less than 100
units per month (generally considered as low income consumers)
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DSM Plan, DSM Programme and DSM Annual Work Plan:
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DSM Plan:
Portfolio of DSM programmes, referred to collectively as DSM Plan. Under this approach,
every distribution licensee in the State will prepare DSM plan based on five-year
planning horizon. The
term of the plan will coincide with the corresponding five
year multi-year Tariff term. At the beginning of the five year cycle, the Commission
will accord approval to the DSM Plan.
DSM Programme Document:
After approval of the DSM plan after public hearing, the distribution licensee will
prepare, for all DSM programmes included in the approved DSM plan, a “DSM Programme
Document” (PD).This PD will guide implementation, monitoring, review etc. of all
the approved individual DSM programmes contained in the Plan.
Evaluation, Measurement & Verification (EM&V)
Apart from measurement and verification of the impacts in terms of amount of energy
(kWh) saved and/or demand (MW/kW) reduced at the DSM plan and individual DSM programmes
levels, evaluation of actual cost effectiveness at the Plan and individual programme
level as well as the assessment of the programme assumptions made at the planning
stage will also form an important part of the EM&V process.
To give effect to the EM&V concerns of the Commission, it will be mandatory
to include, EM&V plan as an integral part of every DSM plan and every DSM programme
proposal that will be sent to the Commission for approval.
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