CERC Dismisses Solar Developer's Plea to Grant Connectivity to its Subsidiaries

The Central Electricity Regulatory Commission (CERC) dismissed a solar developer’s plea to allow utilization of connectivity and long-term access (LTA) to its two wholly-owned subsidiaries and said that it was not permitted.

It said if the parent company exercises its control over more than 50% of the voting shares of the company directly or indirectly, the request for LTA and utilization of connectivity for its subsidiaries could not be approved.

The regulator said that if the petitioner found a conflict in the provisions of the power purchase agreement (PPA) with the 2009 connectivity regulations, it should request the Solar energy Corporation of India (SECI) to amend the PPA.

ReNew Sun Waves, a subsidiary of ReNew Power had filed a petition seeking directions from the Commission to address certain problems being faced in implementing the PPA. It had also asked for connectivity between the two wholly-owned subsidiaries to be allowed, given that the parent company owned more than 50% of the voting shares of such company or the right to appoint majority directors.


Context

In its submission, ReNew Sun Waves said that the competitive bidding guidelines allow the successful bidder to transfer 49% of its shareholding in the special purpose vehicle (SPV), executing the PPA to a third-party at any time without approval of the procurers. However, to transfer more than 49% of its shareholding in such SPV, prior approval of the procurers was required if such transfer of shareholding is at any time before the expiry of one year from the commercial operation date (CoD).

On January 10, 2019, SECI invited proposals for setting up grid-connected solar power projects on a ‘Build, Own, and Operate (BOO)’ basis for an aggregate capacity of 1,200 MW. The request for selection (RfS) contained the model PPA and PSA, which were prepared per the competitive bidding guidelines.

Based on a reverse bidding process, ReNew Sun Waves was declared as one of the successful bidders. On March 05, 2019, SECI issued a Letter of Award (LoA) for the supply of 300 MW power, in favor of one of ReNew Sun Waves’ wholly-owned subsidiaries. Subsequently, on August 13, 2019, ReNew Sun Waves and SECI executed a PPA for the supply of 300 MW power for 25 years.

In an earlier order, the Commission had said that RfS issued by SECI allowed for the creation of SPVs for project implementation. Several companies were executing projects through the creation of subsidiaries after winning the bids.

The solar developer said that the connectivity regulations, 2009 provided that a person should not transfer its connectivity or LTA either in full or in part to any other person. However, the regulation was silent on whether such connectivity and LTA granted to the parent company could also be utilized between its two wholly-owned subsidiary companies.

Commission’s Analysis  

The regulator said there was no provision regarding the transfer of connectivity or LTA in the connectivity regulations 2009.

After going through all the facts, the Commission said that the petitioner should have noted the applicable regulations governing connectivity and LTA while participating in the bidding process. Not having done so, after being declared a successful bidder, it cannot seek that certain provisions of regulations should be favorably amended to benefit the developer.

“While the competitive bidding guidelines that the central government has notified under Section 63 of the Act deal with the transparent process for bidding, the 2009 connectivity regulations have been notified by the Commission deal with issues related to connectivity and LTA,” it said.

In August last year, CERC issued a detailed procedure for granting connectivity to renewable projects to the interstate transmission system. This procedure will apply to central transmission utility, regional load despatch centers, state load despatch centers, state transmission utility, concerned distribution companies, and renewable energy implementing agencies like SECI.

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