The Central Electricity Regulatory Commission’s (CERC) proposed framework for milestone extension charges could bring greater discipline to the General Network Access (GNA) regime.

However, renewable energy developers say the final framework must distinguish between developer-driven delays and those resulting from transmission readiness, power purchase agreement (PPA) execution, financing, land approvals, and statutory clearances.

CERC has proposed milestone extension charges (penalty fees developers pay when seeking extra time to meet mandatory project deadlines) of ₹1,500 (~$15.54)/MW/day for additional time to submit land documents in the first month. The charge will rise to ₹1,650 (~$17.09)/MW/day in the second month and ₹1,800 (~$18.65)/MW/day in the third month.

For financial closure, the charges proposed are ₹1,500 (~$15.54)/MW/day for the first three months, with escalation in the fourth, fifth, and sixth months. For commercial operation date (COD) delays, the charges are ₹3,000 (~$31.08)/MW/day for the first six months, then ₹6,000 (~$62.16)/MW/day for the next six months. Where revocation is triggered within two months of the GNA’s effective date, no milestone extension charges will apply for the first two months.

The Commission said developers need time for trial runs, pre-commissioning tests, and integration activities, which can be carried out only after the relevant bay and substation are charged.

Extension Charges  Necessary but Incomplete

According to Vinay Pabba, CEO of Vibrant Energy, the genesis of this proposal lies in a structural tension that has been building within the GNA framework since its notification in June 2022. “When CERC introduced the GNA Regulations, it made a deliberate policy choice to move away from the earlier long-term open access regime and create a more disciplined, milestone-linked connectivity framework.”

He noted that the GNA framework attracted a large volume of connectivity applications, many of which were filed without commensurate project preparedness in terms of land acquisition, offtake arrangements, or equity mobilization. The escalating milestone-extension charge structure imposes a financial carrying cost for continued occupancy of connectivity slots without corresponding project advancement.

Another developer noted that several bona fide projects have faced genuine headwinds, including protracted land acquisition, extended tender-to-PPA timelines, and, in several cases, delays in ISTS substation commissioning by the Central Transmission Utility itself. A blanket revocation policy applied without such distinction would have been commercially harsh and counterproductive to India’s renewable energy deployment targets.

Developers Mercom spoke with were unanimous in saying that the eligibility thresholds in the draft procedure, including the minimum land document compliance required before accessing the milestone extension charges window, can help filter out speculative applicants while preserving relief for developers that have demonstrated project commitment.

External Delays a Concern

Pabba said the framework would improve discipline only partially because it cannot address delays outside a developer’s control. “The milestone extension charges framework, as currently proposed, does not, and structurally cannot, address the underlying causes of delay that are exogenous to the developer.”

Land acquisition remains dependent on state-level revenue administration, inter-departmental coordination, and community acceptance. Financial closure timelines are influenced by lenders’ risk appetites, which often depend on offtake certainty. Statutory clearances for forest, environment, and defense approvals also follow timelines that developers can pursue but cannot compel.

The other developer argues that delays caused by transmission readiness, PPA execution, state approvals, and statutory clearances should not be treated on a par with matters within the developer’s control.

No Time for Trial Runs

Transmission readiness remains the most critical concern. The draft order acknowledges the specific hardship for developers, noting that GNA takes effect on the same day the substation achieves COD, leaving no time for trial runs or pre-commissioning activities.

“The Commission’s response, a two-month milestone extension charges -free window post-GNA effective date, is a welcome, if modest, relief,” Pabba said.

The broader issue of systemic delays in the commissioning of interstate transmission system substations by the Central Transmission Utility remains insufficiently addressed.

The developer also argued that penalizing a developer for delays attributable, even in part, to the transmission utility’s execution failures raises legitimate questions of regulatory equity.

They have also sought clarity on how the final procedure will address cases in which ISTS infrastructure delays prevent evacuation or commissioning despite project readiness. Developers also argue that the milestone extension charges clock should start only after the associated transmission system is ready for use.

Calls for Causation-Based Relief

Pabba said the final framework should distinguish between developer-attributable delays and delays caused by external factors, including renewable energy implementing agencies, distribution companies, state authorities, lenders, Central Transmission Utility, and transmission licensees.

The draft adopts a position that is explicit and deliberately blunt, which is that compensation charges shall apply ‘irrespective of the reasons for such delay.’ The Commission’s rationale is understandable. Connectivity is a scarce resource, and the system cannot afford indefinite forbearance regardless of causation. However, conflating developer-attributable delays with delays caused by external institutional failures is counterproductive.

“Where delay is demonstrably attributable to an external agency, milestone extension charges liability should either be suspended or the extension period should not count against the developer’s maximum allowable additional time,” Pabba said.

Delay Costs Could Affect Future Bids

The cost implications of the framework could affect future bidding. Developers may need to price the exposure to milestone extension charges as a contingent liability in project cost models.

“Given the compressed bid margins that characterize India’s renewable energy auctions, where L1 and L2 bids are often separated by fractions of a paisa, even a modest milestone extension charges liability on a large project can meaningfully impair returns. The rational developer response is to build a risk premium into bids, exerting upward pressure on discovered tariffs,” Pabba said.

The developer also added that lenders may factor exposure to milestone extension charges into credit assessments by imposing higher debt service reserve requirements or tighter covenants. Where milestone extension charges arise from delays caused by distribution companies or renewable energy implementing agencies, developers may seek recovery through change-in-law provisions in power purchase agreements, thereby increasing litigation risk.

They also warn that a fault-neutral milestone extension framework could raise the cost of capital for projects in which delay risks are linked to external agencies rather than developer performance.

Smaller Developers at Risk

The proposed charges may affect smaller developers more than large renewable energy companies.

“For a smaller, single-project or limited-portfolio developer, the same charges, at ₹3,000 (~$31.08) to ₹6,000 (~$62.16)/MW/day across a meaningful capacity quantum, can rapidly escalate into a sum that threatens financial closure itself, creating a perverse spiral where the penalty for delay accelerates the very default it seeks to prevent,” Pabba said.

This could lead to market consolidation, reduced bidding competition, and upward pressure on tariffs if smaller and mid-sized developers reduce participation or sell distressed assets to larger players. As a solution, CERC could consider a tiered, milestone-extension-charge structure based on project size, or a cap on aggregate milestone-extension-charge liability as a proportion of project equity.

Overlapping Charges

Another concern highlighted by the developer is the possibility of overlapping charges. CERC’s draft procedure states that additional time allowed under the milestone extension charges mechanism will not change the firm start date for connectivity, and the entity will remain liable to pay applicable mismatch charges under the Sharing Regulations, 2020.

However, the potential for simultaneous milestone extension charges and mismatch charge liability on the same capacity for overlapping periods requires explicit clarification. “The cumulative financial burden of dual levy, if not addressed, could render the relief window commercially unviable for a significant number of entities,” said Pabba.

Developers say the final procedure should clarify whether milestone extension charges and mismatch charges can apply simultaneously, and whether an adjustment mechanism will be available when both levies arise from the same delay period.

Developers Seek Transmission Accountability

Pabba recommended five changes before CERC finalizes the procedure: causation-based differentiation, symmetric accountability for CTU and renewable energy implementing agencies, a more gradual COD charge escalation curve, a tiered or capped milestone extension charge structure for smaller developers, and clarity on the overlap between milestone extension charges and mismatch charges.

Developers argue that milestone extension charges are necessary but not sufficient. For the framework to be truly effective and equitable, it must be accompanied by a symmetric accountability mechanism on the transmission side, clear timelines and consequence frameworks for the Central Transmission Utility during substation commissioning, and a structured force majeure carve-out that distinguishes developer-attributable delays from systemic, externally driven ones.

The developers also said that any connectivity capacity freed up through stricter milestone compliance or revocation should be reallocated efficiently to serious applicants, including green hydrogen developers with demonstrable project readiness. Since green hydrogen developers are not permitted to obtain ISTS connectivity for associated renewable projects solely on the basis of a letter of award (LoA) for green hydrogen production, such developers must either use a valid power-procurement LoA/PPA route or apply through the land/land-bank guarantee route under the GNA Regulations.

Allowing eligible and prepared green hydrogen projects to access freed-up transmission capacity through these routes could support better utilization of scarce connectivity capacity while advancing India’s green hydrogen targets.