Initiative by Forum of Regulators in DSM 24 th January,2012 1

FOR Introduction The Forum of Regulators (FOR) was constituted on 16th February, 2005 in pursuance of the provision under section 166(2) of the Electricity Act, Section 166 (2) The Central Government shall also constitute a forum of regulators consisting of the Chairperson of the Central Commission and Chairpersons of the State Commissions. 2

Initiatives of FOR on DSM REPORT OF THE WORKING GROUP ON “DSM & ENERGY EFFICIENCY IN SEPTEMBER,2008 REPORT ON INSTITUTIONALISING ENERGY EFFICIENCY & DEMAND SIDE MANAGEMENT IN UTILITY SECTOR IN INDIA JUNE 2010 MODLE REGULATIONS ON DEMAND SIDE MANAGEMENT IN MAY 2010 COST BENEFIT ANALYSIS OF DSM PROGRAMME REGULATED MULTISTATE DEMAND SIDE MANAGEMENT PROGRAMME CAPACITY BUILDING PROGRAMME on DSM & EE 3

Major recommendations of FOR on DSM FOR has brought out a strategy report with certain key recommendations. 1) DSM cells should be constituted in all the distribution utilities. 2) The State Governments should consider financially supporting the DSM programmes and reduction in taxes on energy- efficient appliances. 3) Recovery of cost of approved DSM programmes should be allowed as pass through in Annual Revenue Requireme nt (ARR). 4

SERCs to direct all the distribution utilities to submit DSM Plans along with ARR rates for the next tariff period. Recovery of cost of approved DSM programmes should be allowed as pass-through in ARR. Bureau of Energy Efficiency has been requested –to undertake development of Monitoring and Verification protocols for various DSM programmes which may be undertaken by utilities. –to prepare draft of a suggested Regulation for appraisal of programmes of DSM and Energy Efficiency in distribution sector. The State Governments to be requested to consider the following: –Financially supporting the DSM programmes aimed at such category of consumers which are receiving tariff subsidy from the State Governments. –Enhancing effectiveness of the State Designated Agency (SDAs). –Reduction in taxes on energy efficient appliances. 5

Model regulation of DSM DSM Model Regulations have been finalized by FOR Salient features : Regulations provide for DSM Objectives and targets to be set by the SERC for the Distribution Licensee. Provide for guidelines on various aspects of DSM processes: – Load and market research, – Implementation of DSM programmes, – Cost Effectiveness Assessment of DSM programmes, – Monitoring and Reporting and Evaluation, – Measurement and Verification of savings through DSM programmes; – Eligibility criteria for DSM programmes, – Guidelines for setting targets; – Database development framework guidelines etc. 6

Every DISCOM must create a DSM cell to plan,develop monitor and implement DSM initiatives on a sustained basis. Every DISCOM should be directed to prepare DSM plan and provide budget for its implementation. Recovery of cost on the DSM should be allowed as a pass through in ARR. Result of DSM programmes/projects should be got verified by third party measurement and verification experts. Load research should be taken up systematically because it would provide insight into consumer load profile which will help DISCOM in rate design,load forecasting, load control and load management. SERCs may provide a special rebate in tariff to those buildings premises (both old and new )which are certified (on annual basis )by agencies authorized by BEE. Concerned authorities could consider mandating installation of star- rated energy efficiency pumps sets in those areas where continuous heavy pumping is required such as municipal water works,sewages work,and lift canals. 7

Status on DSM Regulation at State Level Jammu & Kashmir, Tripura,Himachal & Maharashtra have issued regulations on DSM. Punjab, Assam,Kerala and Gujarat have issued draft Regulation on DSM. 8

Guidelines on Cost Benefit Analysis Guidelines for cost effectiveness assessment are required to be issued by the SERCs. DSM programme to be approved if Cost Effectiveness Index (CEI) for a particular DSM programme is greater than one and the Cost of Conserved Energy (CCE) for consumers is less than average tariff paid by that category of consumers.Cost Effectiveness Index (CEI)Cost of Conserved Energy (CCE) In programmes where distribution licensee is bearing all costs of DSM programme, the Cost of Conserved Energy (CCE) is not applicable. The cost in the DSM process such as costs of load and market research, potential assessment, design and development of DSM plan and other administrative costs shall be approved by the Regulatory Commission on ‘case to case’ basis. Detailed analysis of costs and benefits should be undertaken at the stage of preparation of Programme Document. 9

Key Policy Objectives of Regulated Multi State Demand Side Management Programme(RMSDP) Promote long term utility based DSM. Reduce transaction costs by bundling future demand across several states/ regions - higher demand to stimulate reduction in prices - necessary to sustain the market in the long run. Enhance the ease of administering the programme - simpler and more robust evaluation and monitoring, leading to greater transparency and accountability. Enable design and deployment of appliances that are better suited to Indian conditions and accelerated adoption of superior technology. Facilitate better coordination with the Standards and Labeling program and allow rapid ratcheting-up of energy performance standards. Significantly accelerate the pace of market penetration of super efficient appliances in the market. Enable India to take leadership position in designing, developing and implementing such a programme – eg. SEAD 10

RMSDP – Leveraging Energy Savings 11 Implementation of RMSDP Monitoring sale of SEE in Utility coverage area Allow payment of incentives to manufacturers Regulatory Approvals Allow regulatory charge as a part of ARR of Utilities Creation of DSM fund for collection of regulatory charge Establishment of SEE Establish specifications for ‘super-efficient’ devices Cost-benefit analysis and of period of incentive Labeling of ‘super- efficient’ equipments (SEE) Determination of incentives based on peak load reduction Monitoring sale of SEE, verification and incentive payout

FOR has given In-principle approval 1.To allow regulatory charge as a part of ARR of Utilities. 2.To allow creation of DSM fund for collection of regulatory charge. 12

Training Programme Details FOR conducted a DSM Training Workshop, at CERC, Delhi,March 2-5, 2009 A six days residential training programme on ‘Demand Side Management and Energy Efficiency” from 2 nd to 7 th March, 2009,NPTI, Faridabad. A Three Days Residential Training Programme on “DSM & Energy Efficiency” from 16 th to 18 th November, 2010,NPTI, Faridabad. A Training Programme on ‘Demand Side Management’ Capacity Building from 10 th to 14 th October, 2011, IIT, Roorkee. 13

MOU of FOR with International Bodies  FOR has entered into an MOU with the California Energy Commission and the California Public Utilities Commission (CPUC) and the Lawrence Berkeley National Laboratory (LBNL).  As part of this MOU, the Parties will endeavor to promote information exchanges and future joint research activities in the areas of Energy efficiency and Demand-Side Management policies and programs.  Already, under the MOU, DSM experts from LBNL, CPUC and CEC have conducted three training programmes for the personnel from state Regulators and DISCOMS.  The programmes were conducted in 2009/10/11 which covered DSM, DSM programme design and load research. 14

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Model regulation of DSM The DSM Model Regulations have been finalized by FOR The salient features are- The Commission shall formulate DSM objectives taking into consideration the National DSM Objectives/ Plans formulated by BEE. Distribution Licensee shall be guided by methodology developed by Bureau while assessing of technical potential for DSM. The Commission shall establish DSM targets for each Distribution Licensee in the State. The Commission shall issue guidelines from time to time for the following activities 1. Load and Market research 2. Implementation of DSM programmes. 3. Cost Effectiveness Assessment of DSM programmes 4. Monitoring and Reporting of DSM Plans and Programmes 5. Eligibility criteria for DSM Programmes 6. Methodology for setting DSM targets and funding levels 7. Database development framework 20

Every Distribution Licensee shall, constitute DSM Cell. Distribution Licensee shall undertake load and market research and develop a necessary database. Distribution Licensee shall formulate DSM Plan. The Commission shall review and approve a DSM plan. For each DSM programme cost benefit analysis shall be carried out as per guidelines issued by the Commission on Cost effectiveness from time to time. Prior to implementing any DSM programme, Distribution Licensee must obtain approval of the Commission Distribution Licensee shall undertake implementation of DSM programmes in line with the guidelines issued by the Commission from time to time The cost recovery of each program must be approved prior implementation. Distribution Licensee shall prepare plan and undertake monitoring and reporting of DSM programmes as per Guidelines Distribution Licensee shall prepare plan for evaluation, measurement and verification of savings from DSM programmes as per Guidelines DSM Plan and Programme Completion Report shall be submitted to the Commission. The Commission may provide incentives to Distribution Utilities for achieving or exceeding DSM Objectives. 21

Guidelines may be modified without modifying Regulations. Provides for various activities to be undertaken in the DSM framework – Load research and development of baseline data, formulation of DSM Plan, Commission review and approval of DSM plan, preparation and approval of DSM Programme Document, and implementation of DSM programmes Third party intervention in performing the most important task such as Evaluation, Monitoring and Verification is envisaged and responsibility has been kept with SERC; Considering the reach of the Distribution Utility, most of the execution related tasks have been assigned to them. In addition, the responsibility of assessment of technical potential and market research has been placed on them. 22

Model regulation of DSM The DSM Model Regulations have been finalized by FOR The salient features are- Every DISCOM must create a DSM cell to plan,develop monitor and implement DSM initiatives on a sustained basis, and staff this DSM cell with dedicated staff and equip it with dedicated resources and budgets. Every DISCOM should be directed to prepare DSM plan and provide budget for its implementation. Recovery of cost on the DSM should be allowed as a pass through in ARR. Pre-identified source of funds such as penal interest on late payment bills, load management charges could be earmarked for financing DSM activities. DSM bidding mechanism developed and institutionalized for implementation of DSM projects aiming at targeted saving in terms of MW of load avoided and/ or kwh of energy purchase avoided in identified places such as distribution transformer,feeders, or bulk consumer such as airports,commercial complexes, etc. The cost could be partly founded by the DSM plan of the utilities. Result of DSM programmes/projects should be got verified by third party measurement and verification experts. 23

Load research should be taken up systematically because it would only provide data on impact of DSM initiatives in terms of savings in energy and reduction in demand, but it would also provide insight into consumer load profile and data on cost service,data on profitability analysis, and would also help DISCOM in rate design,load forecasting, load control and load management. Power procurement plans should take into consideration the project feasible savings through Energy conservation and Energy efficiency measures. Capacity building of staff of the SERCs and the utilities through domestic /international visits to places where DSM has been successfully implemented should also be included in DSM plans. BEE should promote development of ESCOs for implementing DSM projects,especially in area of energy efficient air conditioning in large offices/commercial complexes and municipal street light. SERCs may provide a special rebate in tariff to those buildings premises (both old and new )which are certified (on annual basis )by agencies authorized by BEE,to be compliant with ECBC. Concerned authorities could consider mandating installation of star-rated energy efficiency pumps sets in those areas where continuous heavy pumping is required such as municipal water works,sewages work,and lift canals 24