The Gujarat Electricity Regulatory Commission (GERC) has approved the refund of connectivity charges of ₹100,000 (~$1,079) per application to small-scale distributed solar project developers who exercised the second-time exit option.

The Commission noted that such connectivity charges are classified as non-refundable under Regulation 7(2) of the GERC (Terms and Conditions of Intra-State Open Access) Regulations, 2011, and that it was necessary to relax the provision on non-refundable connectivity charges.

GERC noted that the refund will also apply to developers who have not signed the power purchase agreements (PPAs).

Background

The case originates from Gujarat’s 2019 policy to develop small-scale distributed solar projects, aimed at promoting renewable energy.

Under this framework, the Gujarat Urja Vikas Nigam (GUVNL) and state distribution companies (DISCOMs) entered into PPAs with developers. The program was optional, allowing developers to participate based on commercial viability.

However, several developers later faced financial challenges, particularly due to the absence of capital and interest subsidies, which made the projects unviable.

Consequently, developers requested permission to exit PPAs without penalties and sought refunds of charges paid, including application fees, connectivity charges, supervision charges, and return of bank guarantees.

In response, the Gujarat government introduced a one-time exit option in 2021 and later a second-time exit option in 2022, allowing developers to withdraw without penalties.

The government also decided that most charges collected from developers opting for exit would be refunded.

However, since connectivity charges were classified as non-refundable under existing regulations, GUVNL approached the Commission seeking approval to refund these charges.

Commission’s Analysis

The Commission acknowledged that the non-refundable nature of connectivity charges is intended to deter non-serious applications and recover administrative costs.

At the same time, it emphasized that such provisions are general  and should not be applied in all circumstances without regard to other facts.

The Commission noted that once the regulatory relaxation is granted in respect of connectivity charges, which are otherwise non-refundable, to a class of developers who have executed PPAs, there is no basis to deny similar relief to developers who have not executed a PPA.

On the contrary, from a fairness standpoint, such developers are on an equal footing, as they have not derived any contractual benefit either.

Considering this, the Commission held that the benefit of a refund of connectivity charges will also be extended to developers who have not signed the PPAs.

GERC observed that the developers had participated under a government policy framework and that their exit was not due to individual default but due to a broader policy decision affecting an entire class of developers.

It also noted that, as refunds had already been allowed for other charges, it is only correct to approve the refund of connectivity charges.

Recently, GERC extended the applicability of the ₹1.50 (~$0.0159)/kWh banking charge under the state’s green energy open access framework until June 30, 2026.

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