In a significant judicial intervention for the renewable energy sector, the Karnataka High Court issued an interim stay on April 27, 2026, against specific provisions of the Central Electricity Regulatory Commission’s (CERC) Deviation Settlement Mechanism (DSM) Regulations, 2024. Presiding over the matter, Justice KS Hemalekha halted the enforcement of a stricter penalty regime that had come into effect earlier that month. The court’s order provides immediate relief to several major green energy producers, allowing them to revert to the established 2014 regulatory framework for managing power grid supply variances until the case is heard again in June.
Scope of the Interim Stay
The High Court’s order specifically stays the operation of Regulations 6(2)(b) and 8(4) of the CERC (Deviation Settlement Mechanism and Related Matters) Regulations, 2024. These provisions, which became effective on April 1, 2026, introduced a revised formula for calculating deviation charges and established more stringent financial consequences for generators failing to adhere to their scheduled supply commitments.
The stay is currently applicable to the petitioners, ensuring they are not penalized under the new norms during the litigation process. The court has issued notices to the federal government and the CERC, directing them to file their responses to the challenge by June 10, 2026.
Comparison of Regulatory Frameworks
The interim order mandates that the petitioners continue to be governed by the 2014 DSM Regulations, which provided for broader deviation tolerances. The following table outlines the technical differences between the stayed 2024 framework and the standing 2014 regime:
| Regulatory Feature | DSM 2024 Framework (Stayed) | 2014 DSM Regulations (Interim Regime) |
| Deviation Bands | Imposed narrower and more stringent bands for supply variances. | Permits a broader 15% deviation band for renewable generators. |
| Penalty Structure | Introduced “enhanced” and significantly more punitive financial penalties. | Reverts to the previous, less punitive penalty system for grid supply differences. |
| Computation Formula | Attempted to alter the fundamental formula for computation of deviation charges. | Maintains the established computation formula used prior to April 2026. |
Technical and Procedural Grounds for Challenge
The petitioners, represented by senior counsel, argued that the 2024 regulations suffered from deep procedural and operational flaws.
- Lack of Public Consultation: A core argument rested on the non-compliance with mandatory prior publication requirements under Section 178(3) of the Electricity Act, 2003. Petitioners alleged that the “revised formula” ultimately notified was absent from the initial draft notification. This omission allegedly denied stakeholders a meaningful opportunity to object to a substantive change, rendering the provision arbitrary and violative of the principles of natural justice.
- Nature of Renewable Generation: The industry contended that solar and wind power output is inherently weather-dependent and uncontrollable. Unlike conventional coal- or gas-based plants, renewable generation cannot be precisely scheduled, making the imposition of rigid deviation penalties scientifically and operationally impractical.
- Impact on Clean Energy Transition: Legal representatives argued that the “punitive environment” created by the 2024 regulations would lead to substantial revenue losses. They further cautioned that such measures serve as a deterrent to the clean energy transition, potentially undermining India’s national goal of achieving 500 gigawatts of renewable energy capacity by 2030.
Involved Parties and Legal Entities
The legal challenge was brought forward by a coalition of influential industry bodies and independent power producers.
Petitioners:
- National Solar Energy Federation of India (NSEFI)
- Renew Wind Energy (TN2)
- Sembcorp Green Infra
- Yarrow Infrastructure
- JSW Neo Energy
- Spring Solar India
- Indigird
Respondents:
- Central Electricity Regulatory Commission (CERC)
- India Meteorological Department (IMD)
- National Centre for Medium Range Weather Forecasting
- Grid Controller of India
Current Status and Compliance Directive
Until the next hearing in June 2026, the Karnataka High Court has directed that renewable energy companies may continue to utilize the 2014 DSM payment systems and norms. Specifically, the court clarified that deviations up to 15% shall be governed by the earlier framework, and petitioners are required to pay deviation charges accordingly. This judicial pause provides a temporary shield for the industry against the enhanced financial liabilities introduced by the 2024 regulations while the court examines the legality of the CERC’s notification process.
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