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					</table>The Rajasthan Electricity Regulatory Commission (<a href="https://rerc.rajasthan.gov.in/" target="_blank" rel="noopener">RERC</a>) has announced a demand flexibility portfolio obligation (DFPO) target of 0.25% for state distribution companies (DISCOM) for the financial year (FY) 2026-27.
The Commission has also issued DFPO targets of 1% for FY 2028, 1.5% for FY 2029, and 2% for FY 2030.
The DFPO targets were issued under the Rajasthan Electricity Regulatory Commission (Demand Flexibility (DF)/Demand Side Management (DSM)) Regulations, 2026.
The draft framework was <a href="https://www.mercomindia.com/rajasthan-regulator-proposes-demand-flexibility-dsm-regulations" target="_blank" rel="noopener">issued</a> in January 2026.
DISCOMs may either meet the DFPO targets through their own programs or by procuring power from registered aggregators.
Demand flexibility is the ability of demand-side loads to vary consumption patterns hourly or on other time scales, making electricity more affordable for consumers. It also involves reducing or deferring system costs or end-use consumption, which can be adjusted as a demand-response measure.
The distribution companies can avail themselves of incentives of ₹2 million (~$21,590.4) for every MW achieved in excess of the DFPO, and a penalty of ₹2 million (~$21,590.4) for every MW achieved below the DFPO. The first year of the regulations&#8217; implementation will not be subject to disincentives.
The regulations will complement supply-side strategies to help DISCOMs avoid/reduce/postpone costly capacity additions and power purchases and instead procure cheaper renewable power.
The DF/DSM portfolio will be structured on a rolling basis for the multi-year tariff/aggregate revenue requirement period.
The DISCOMs must work collaboratively with the state load dispatch center (SLDC) while preparing load research reports and during the program development phase to properly identify network-constrained zones and forecast system requirements.
They must engage in consultations with the SLDC to ensure necessary coordination regarding the planning, design, and implementation of demand control/effective measures for DF/DSM programs. They must also provide the SLDC with timely advance information regarding actions that ensure demand flexibility.
DF/DSM Portfolio
The DF/DSM portfolio will comprise findings from detailed load research, the workings of the possible DF programs to be implemented, and the DFPO targets.
The DSM portfolio must include a five-year strategy and roadmap towards fulfillment of these DFPO portfolio obligations.
It must promote load shifting and demand response programs, and provide appropriate tariff-based incentives or rebates to all high- and low-tension consumer categories that participate in the demand response program by installing smart meters.
DISCOMS must submit the DF/DSM program portfolio and implementation action plan annually.
They must also implement DF/DSM programs that add to the resource adequacy portfolio and include demand flexibility to provide quick ramp-up and ramp-down services, reduce peak demand, and reduce associated costly power purchases.
DF/DSM Programs
The regulations outline several demand flexibility and demand-side management measures across sectors.
They include time-based and selective pumping for lift irrigation programs, municipal corporations, urban local bodies, and rural drinking water programs.
The regulations include grid-to-vehicle and vehicle-to-grid integration through smart charging infrastructure for electric vehicles, as well as behind-the-meter battery energy storage systems in line with RERC battery energy storage system regulations.
They promote the use of heat pumps and thermal energy storage systems across residential, hospital, hotel, commercial, and industrial buildings.
Additionally, DF/DSM programs cover efficient refrigeration and cold storage programs and encourage consumers to replace old or inefficient appliances with energy-efficient alternatives.
They also entail monitoring of harmonic levels in the grid and ensuring centralized procurement of demand flexibility from the aggregators.
The framework encourages shifting agricultural electricity consumption to periods when solar or wind power is available, including through solar agriculture or the PM-KUSUM program.
It also encourages consumers to participate in utility-led aggregation models, such as virtual net metering and group net metering, and to adopt advanced business models, such as cooling-as-a-service and integrated building management systems.
The regulations also clarified that fossil-fuel-based diesel generators can participate as demand flexibility or DSM resources.
The DISCOMs can propose recovering all justifiable costs incurred by them for DF/DSM activities. A percentage of the DISCOM’s budget will be allocated to funds under the DF/DSM cell.
They must conduct cost effectiveness assessment of the DF/DSM program to validate the total resource cost and ratepayer-impact measures.
Independent verification agencies can be engaged to evaluate the effectiveness of the programs. DISCOMs must also evaluate the impact of the regulations, evaluate the process, and their effect on the market.
In February 2026, RERC <a href="https://mercomindia.com/rerc-revises-power-connection-charges-supply-rules-for-high-demand-consumers" target="_blank" rel="noopener">notified</a> the Second Amendment to the Electricity Supply Code and Connected Matters Regulations, 2025, introducing significant changes to the rules governing the recovery of dues from permanently disconnected consumers, timelines for the restoration of supply, and connection charges for loads up to 150 kW.
Subscribe to Mercom’s real-time <a href="https://www.mercomindia.com/product/mercoms-renewable-energy-regulatory-updates" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don’t miss any critical updates from the renewable industry.

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					</table>The Karnataka Electricity Regulatory Commission (<a href="https://kerc.karnataka.gov.in/en" target="_blank" rel="noopener">KERC</a>) has introduced a framework to enhance energy efficiency, manage peak demand, and improve grid reliability through demand-side interventions and demand flexibility measures.
The framework mandates distribution companies (DISCOMs) to adopt energy-saving strategies, optimize consumption patterns, and integrate demand response into resource planning to reduce system costs and infrastructure needs.
The Commission has approved these provisions under the KERC (Framework for Demand Flexibility/Demand Side Management) Regulations, 2026.
The regulations require DISCOMs to adopt demand flexibility and demand-side management measures as part of their day-to-day operations, including the sustained assessment, planning, design, and implementation of programs. These measures are intended to support grid operations, balance supply and demand, and contribute to resource adequacy planning.
Demand flexibility is defined as the consumers’ ability to adjust electricity consumption in response to system signals such as prices, grid conditions, and reliability requirements, including enabling renewable energy integration, reducing peak demand, and supporting system operations.
Each DISCOM must establish a dedicated demand flexibility and demand-side management cell responsible for implementing, monitoring, and reporting on these programs.
Mandatory Targets and Compliance Mechanism
The regulations introduce demand flexibility portfolio obligations, requiring DISCOMs to ensure a specified percentage of flexible demand relative to the previous year’s peak demand.
The trajectory begins at 0.5% in financial year (FY) 2026–27, 1% in FY 2027-28, 1.5% in FY 2028-29, and 2% in FY 2029-30.
A performance-linked mechanism has been specified, under which DISCOMs will receive an incentive of ₹2 million (~$21,270)/MW for exceeding demand flexibility portfolio obligations targets and will be subject to a disincentive of the same amount for any shortfall.
Program Design, Planning, and Reporting Requirements
DISCOMs must develop a portfolio of demand flexibility and demand-side management programs based on detailed load research and submit it along with their multi-year tariff filings, including an implementation action plan. Annual status reports on implementation must be submitted with annual performance review filings.
The regulations also mandate that licensees publicly disclose key documents, including load research reports; appliance use and saturation studies; demand flexibility and demand-side management program portfolios and action plans; implementation status reports; and evaluation and verification reports, on licensees’ websites.
Scope of Demand Flexibility and DSM Programs
The framework provides an indicative list of program areas that may be included in the demand flexibility and demand-side management portfolio. These include time-based operation of water pumping systems, smart charging of electric vehicles, behind-the-meter battery energy storage, thermal energy storage, efficient refrigeration systems, replacement of inefficient appliances, and behavioural interventions for energy conservation.
Programs may be implemented directly by DISCOMs or through aggregators registered with the licensees. The regulations require that aggregators and independent verification agencies remain separate entities.
Cost Recovery, Consumer Safeguards and Transitional Provisions
DISCOMs are permitted to recover prudently incurred costs associated with demand flexibility and demand-side management activities, including planning, implementation, monitoring, and evaluation through tariff filings, subject to regulatory scrutiny and cost-effectiveness assessment.
All demand flexibility and demand-side management programs must be cost-effective, protect consumer interests, be implemented equitably, and result in overall tariff reductions.
For the multi-year tariff control period FY 2025-26 to FY 2027-28, the regulations specify that demand flexibility and demand-side management programs must be undertaken through reappropriation of approved capital expenditure and included in annual performance review proposals.
Cost-Effectiveness Framework and Key Parameters
The regulations prescribe a structured approach for evaluating the economic viability of demand flexibility and demand-side management programs. The total resource cost test serves as the primary screening criterion, requiring that the net present value (NPV) of program benefits exceeds costs. This is followed by the ratepayer impact measure test to ensure that program implementation does not adversely affect tariffs.
DISCOMs are also required to submit results of the participant cost test and societal cost test, although these are not used for decision-making. The Participant Cost Test measures the quantifiable benefits and costs to a consumer of participating in a demand flexibility and demand-side management program, and the Societal Cost Test measures the quantifiable benefits and costs of the program to society as a whole.
The regulations specify default values for key inputs, including the avoided cost of power purchase and discount rates. For the ratepayer impact measure and participant cost test, the avoided cost will be based on the weighted average of the highest marginal power purchase cost across the top 10% of the energy-use stack. Meanwhile, the societal cost test is set at ₹10 (~$0.11)/kWh, based on the CERC day-ahead market ceiling rate.
Benefits will be calculated with a 5% year-over-year escalation, and discounting will be based on the weighted average cost of capital.
Measurement, Verification, and Institutional Requirements
The regulations establish a detailed framework for evaluation, measurement, and verification covering impact, process, and market effects evaluations. Savings will be estimated by comparing baseline consumption with post-implementation usage, with appropriate adjustments.
DISCOMs must empanel independent verification agencies that include certified energy auditors, energy managers, or certified measurement and verification professionals, and possess relevant experience in program evaluation and data analysis.
The evaluation, measurement, and verification process must be transparent and, where feasible, supported by online and real-time assessment tools.
Earlier, the Rajasthan Electricity Regulatory Commission <a href="https://www.mercomindia.com/rajasthan-regulator-proposes-demand-flexibility-dsm-regulations/" target="_blank" rel="noopener">issued</a> the draft Rajasthan Electricity Regulatory Commission (Demand Flexibility/Demand-side Management) Regulations, 2026, proposing a comprehensive regulatory framework to integrate demand-side resources into the state’s power system.
Subscribe to Mercom’s real-time <a href="https://www.mercomindia.com/product/mercoms-renewable-energy-regulatory-updates" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don’t miss any critical updates from the renewable industry.

Karnataka Notifies Framework for Demand Flexibility and Demand-Side Management

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