CERC Rejects Solar Developer’s Petition for Exemption of Relinquishment Charges

In a recent order, the Central Electricity Regulatory Commission (CERC) has dismissed the petition filed by ReNew Solar Power Private Limited for the exemption of relinquishment charges.

The Commission said that there would be no exemption from the payment of relinquishment charges either for a conventional or a renewable energy generator. Relinquishment charges are those that a power generating company has to pay if it decides to surrender its transmission network for various reasons like a lack of power demand.

The order added that the calculation of relinquishment charges depends on various factors such as the notice period, load flow scenario, and applicants for the grant of long-term access (LTA) against the relinquished capacity in the same corridor.

In this case, the Commission has observed that unless the petitioner (ReNew Power) relinquishes the LTA, it would not be possible for Power Grid Corporation of India (PGCIL) to calculate such charges. The CERC added that it had provided a detailed methodology for carrying out the calculations, and ReNew Power can make an estimate based on the methodology and available information.


Background

ReNew Solar Power Private Limited had filed a petition before the CERC requesting the Commission to direct the Power Grid Corporation of India Limited to pre-disclose the relinquishment charges payable before accepting its formal application seeking the relinquishment of open access rights.

ReNew was approved for LTA for its 250 MW solar project at Bikaner on a target region basis (Western Region).

In February 2019, the solar developer also executed a long-term access agreement with PGCIL. The petitioner had sought a solution for the issues relating to the relinquishment charges in the case of renewable projects.

The Commission directed PGCIL to conduct load flow studies to calculate if there’s any stranded capacity created when an entity relinquishes its LTA and then calculate the charges.

The connectivity regulations do not provide any basis for the calculation of compensation to be paid by a long-term open access customer to avail the right to relinquish open access.

According to the petition, the input data for calculating the stranded capacity and relinquishment charges was not available to ReNew Power.

PGCIL and Power system Operation Corporation Limited (POSOCO) are not only the two companies that store such data, but they also store information required for calculating stranded capacity and relinquishment charges.

To bring transparency in the process, the Commission, in its earlier order, had directed the PGCIL to provide information and documents that were necessary for verifying relinquishment charges to power developers.

The Commission also held that the relinquishment charges would be like a compensation, which will be payable to PGCIL for the infrastructure built for the developers.

Ever since the cost of transmission infrastructure has been socialized and the transmission charges have been exempted, there has been no occasion where the renewable energy developers could compensate PGCIL in case of relinquishment of open access.

Hence, the petition states that the pre-disclosure of relinquishment charges is necessary for renewable energy projects as these projects are exempted from payment of transmission of charges by the central government.

PGCIL and POSOCO being the repository of all the transmission related data, are in a better position to examine the requests made by the developers. If a payment of certain costs towards the undertaking system studies is made, then they can pre-disclose the relinquishment charges to the renewable power developer.

So, the petition argued that it is only fair if the compensatory payment is pre-disclosed before it is imposed upon the renewable power developer for relinquishing open access rights.

It further states that since the relinquishment charges are to be calculated based on the transmission charges, it is important to get clarity from the Commission regarding the payment of these charges where the developer has been exempted from the payment of transmission charges.

In its order, the Commission noted that the contention of the petitioner was misplaced. A renewable power project is exempted from the payment of transmission charges and losses for the use of the transmission system, only if it satisfies the conditions of the waiver of transmission charges and losses. However, there is no exemption from the payment of relinquishment charges, and it will have to be paid. Stating this, the petition was rejected.

Notably, the Ministry of Power announced that the inter-state transmission system charges and losses on the transmission of electricity generated from solar and wind energy projects would be waived as long as they are commissioned before December 31, 2022.

Recently, the central body also shed light on the conditions required for the exemption of construction phase bank guarantee for an applicant who fulfills the exemption eligibility criteria for long-term access to power.

Earlier, the CERC issued new guidelines for inter-state transmission system charges and losses. The guidelines highlight the responsibilities of the nodal agencies and the calculation of inter-state transmission charges and losses for solar and wind projects.