The Central Electricity Regulatory Commission (CERC) has approved the deviations sought by Madhya Pradesh Power Management Company (MPPMCL) and Uttar Pradesh Power Corporation (UPPCL) from the standard bidding guidelines for the procurement of 500 MW power from interstate transmission system (ISTS)-connected pumped storage projects.

The Commission clarified that its approval is strictly limited to deviations from the guidelines, and not to the tender documents themselves.

Background

MPPMCL and UPPCL filed a petition seeking approval of deviations from the tender documents for the long-term procurement of 500 MW of power (for six-hour discharge, with a maximum of four hours of continuous discharge per day) from pumped storage projects, to be carried out through competitive bidding.

The petitioners submitted that energy storage requirements in Madhya Pradesh are seasonal (November–April), and a complementary arrangement with Uttar Pradesh (May–October) would optimize utilization and reduce costs.

They argued that the project constitutes a composite program involving more than one state, thereby falling under the CERC’s jurisdiction.

The petitioners stated that the proposed tender is unique and requires certain deviations from standard bidding guidelines due to administrative complexities, project-specific risks, geological uncertainties, and the need to ensure developer participation.

Commission’s Analysis

The Commission held that the project qualifies as a composite program because it involves generating and supplying electricity across multiple states, thereby establishing the Commission’s jurisdiction.

On merits, the Commission examined each deviation and found it justified.

Deviation 1: Timeline for the Adoption of Tariff

The Commission approved extending the tariff adoption timeline from 30 to 60 days due to the administrative requirements of dual-state procurement. It observed that the 30-day timeline in the bidding guidelines is designed for standard, single-procurer contracts to ensure market momentum. The extension to 60 days is a pragmatic cushion that does not harm the selected developer’s interests or the sanctity of the bid.

Deviation 2 (A): Instruments Permitted for Bid Security

The Commission recognized the Ministry of Power’s intent to diversify its financial instruments to reduce developers’ working capital burden. It noted that the bid security should be from a scheduled and nationalized bank to ensure foolproof protection against frivolous bidding. Accordingly, the Commission approved the deviation that limits the submission of bid security (EMD) to bank guarantees only.

Deviation 2 (B): Instruments Permitted for Performance Bank Guarantee

The Commission noted that the EMD applies equally to the performance bank guarantee (PBG). The PBG and additional PBG represent substantial financial leverage intended to ensure the developer’s adherence to the construction timeline and to the subsequent operational performance.

Deviation 3: Liquidated Damages and Contract Termination

The regulator observed that imposing additional performance security ensures that the developer compensates the procurers for lost capacity. This structure aligns with the principles of risk-sharing and infrastructure facilitation. Accordingly, it approved the deviation to replace the six-month termination clause with the proposed staggered extension mechanism.

Deviation 4: Extension of Time due to Delay in Connectivity

CERC noted that establishing the procurer’s right to verify compliance before adjusting the commissioning date ensures grid discipline and contractual accountability. Accordingly, it approved the deviation to add preconditions for extensions related to grid connectivity delays.

Deviation 5: Penalty for Under-Achievement of Target Availability

It found that the standard bidding document’s 1.5X flat tariff penalty is proposed to align with the specific financial contours of this contract, and approved the deviation, introducing an annual fixed-charge-based penalty formula for shortfalls in target availability.

Deviation 6: Stringency in Debarring and Blacklisting

The Commission also took note of the mechanisms that preserve the sanctity of the competitive bidding process, and approved the deviation, enhancing the debarring, blacklisting, and disclosure provisions.

CERC found the deviations reasonable and aligned with the objectives of competitive bidding.

Last August, the Ministry of Power exempted off-stream closed-loop pumped storage projects, irrespective of the quantum of capital expenditure, from the requirement of concurrence by the Central Electricity Authority (CEA). However, the developers of such projects must seek technical guidance from the CEA, the Ministry said.

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