The Central Electricity Regulatory Commission (CERC) has dismissed solar developers’ petition seeking exemption from paying transmission charges to Power Grid Corporation of India (PGCIL) for the portion of the project not completed before the mandated commissioning date.

The solar developer also petitioned to overturn PGCIL’s demand for a letter of credit (LC) as a payment security mechanism.

Background

ACME Holdings won a contract to sell 1,000 MW of power from a solar project in Rajasthan to Maharashtra. For this project, ACME Holdings formed a special-purpose vehicle called ACME Chittorgarh and signed a power purchase agreement (PPA) with MSEDCL on July 27, 2018.

Per the PPA, ACME Chittorgarh was required to notify MSEDCL at least 30 days in advance about the project’s commercial operation date (COD), which was scheduled for October 27, 2019.

ACME Holdings received Stage-2 connectivity on September 14, 2018, and applied for Long-Term Access (LTA) on August 23, 2018, to transfer power from Rajasthan to Maharashtra.

Due to the expected delay in obtaining LTA within the required timeline, ACME Holdings applied for Medium-Term Open Access (MTOA) on November 28, 2018.

PGCIL granted MTOA on January 9, 2019, allowing the transfer of 250 MW of power from Bhadla, Rajasthan, on a firm basis. The MTOA was granted from September 16, 2019, to September 25, 2021, with ACME liable to pay transmission charges as per regulations.

ACME and PGCIL agreed on MTOA on January 28, 2019, which stated that no interstate transmission charges and losses would be levied on solar and wind generation projects until March 31, 2022. They also signed a transmission services agreement on the same day.

However, on July 2, 2019, PGCIL insisted that ACME provide a confirmed irrevocable, unconditional, and revolving letter of credit (LC) of ₹256.53 million (~$3.1 million) as a payment security mechanism before MTOA commenced. According to ACME, this contradicted previous agreements and regulations.

ACME informed PGCIL on July 18, 2019, that they were not obligated to provide an LC as per the 2010 Sharing Regulations, to which end PGCIL responded on August 9, 2019, that the MTOA was expected to become operational by September 2019.

ACME sent an email on August 27, 2019, seeking clarification on the current status and a definite date for the operationalization of MTOA. PGCIL did not respond to ACME’s letter on July 18, 2019, and continued to insist that ACME submit an LC of ₹256.53 million (~$3.1 million).

The Commission admitted the petition on October 4, 2019, and directed PGCIL to notify ACME of the likely date of MTOA operationalization.

PGCIL provided information through an affidavit on October 10, 2019, stating that ACME had applied for LTA and MTOA separately, and the MTOA was dependent on the commissioning of specific transmission elements.

ACME submitted documents for waiving transmission charges and losses for only 100 MW of their project. PGCIL insisted in its submission that for the remaining 150 MW, ACME still needed to establish a payment security mechanism.

ACME requested an extension of the MTOA period to complete the COD and requested PGCIL to waive the requirement of providing an LC.

PGCIL maintained that the LC requirement could not be waived unless ACME met all conditions specified in the 2010 Sharing Regulations.

ACME argued that they had fulfilled the conditions for waiving transmission charges and losses under the 2020 Sharing Regulations. ACME also contended that CTUIL erroneously applied the 2010 Sharing Regulations instead of the 2020 Sharing Regulations, which would result in significantly lower charges.

They further argued that they were not liable to pay transmission charges between October 26, 2019 (the operationalization of MTOA, and January 1, 2020, the commercial operation date of the balance 20 MW project capacity).

ACME claimed that no system augmentation was undertaken for granting MTOA and that CTUIL did not suffer any financial loss due to the delay in commissioning the 20 MW capacity.

Commissions Analysis

The petitioner, ACME Chittorgarh Solar Energy, was required to open an LC as a payment security mechanism for the MTOA granted to them by PGCIL.

The petitioner claimed exemption from paying transmission charges and opening an LC based on Regulation 7(1)(aa) of the 2010 Sharing Regulations. However, PGCIL/CTUIL argued that the petitioner did not meet the conditions for waiver of transmission charges, and thus, the requirement for an LC remained.

The Commission noted that the petitioner was not eligible for the waiver of transmission charges under the 2010 Sharing Regulations before the 15-day deadline for the commencement date of MTOA. Therefore, the petitioner was liable to open the LC per the regulations.

The request of the petitioner to quash the PGCIL letter dated July 2, 2019, and the request for the return of the amount paid as LC were both rejected.

The commissions disagreed with the petitioner’s argument about no financial loss incurred by CTUIL for delayed commissioning and stated that the liability to pay transmission charges arises as per the regulations. They noted that the petitioner separately applied for both LTA and MTOA, and the natural consequences of both should follow.

The commissions concluded that the petitioner is liable to pay the transmission charges for the 20 MW capacity from October 26, 2019, to December 31, 2019, based on the 2010 Sharing Regulations.

In a separate ruling earlier this month, CERC extended the solar and wind projects commissioning deadline to be eligible for the waiver of interstate transmission system charges to October 1, 2023.

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