CERC Sticks To The Letter In PGCIL Tiff With Renew Power

The Central Electricity Regulatory Commission (CERC) has stuck to the letter of the law, rather than going with the spirit perhaps, in a ruling involving wind developers and a power grid corporation.

Renew Power Private Limited obtained Stage-II connectivity for 300 MW at 220 kV Hiriyur sub-station, on the basis of National Thermal Power Corporation Limited (NTPC) LoA in October 2019. It had entered into a Transmission Agreement for Connectivity in January the same year with Power Grid Corporation of India Limited (PGCIL) and also furnished a bank guarantee of ₹5 crore.

On basis of the PPA entered into with Auxo Solar Energy Private Limited, NTPC entered into back-to-back Power Supply Agreement with the Telangana DISCOMs. As per the terms of NTPC PPA and NTPC PSA, Telangana DISCOMs were required to obtain approval of TSERC within two months (subject to extension by mutual agreement). However, not having received approval of TSERC even after six months from the date of signing of the NTPC PPA, Auxo Solar terminated NTPC PPA.

Further, Ostro Energy Private Limited was issued SECI LoA dated in June 2019 for the development of 300 MW ISTS connected wind power project. Accordingly, Renew Power requested PGCIL to allow the utilisation of Stage-II connectivity granted to it by Ostro Energy. Renew Power withdrew its Stage-II connectivity granted against NTPC LoA, and applied for grant of Stage-II connectivity at Hiriyur sub-station against SECI LoA and requested PGCIL to either release the bank guarantee submitted under Transmission Agreement in January 2019 or allow use of same amount for fresh Stage-II connectivity applied against SECI LoA.

In response, PGCIL stated that the CERC had approved the Revised Detailed Procedure for Grant of Connectivity, which, inter alia, has the provisions to deal with a case like this one. As per clause 5.1(2) of the Revised Procedure, “Any action including the revocation of Stage-II connectivity or encashment of BG [bank guarantee] initiated after the issuance of the Revised Procedure shall be in accordance with the provisions thereof.”

Upon considering the submissions of the petitioners and the respondent, PGCIL, the commission stated that during the hearing dated in June 2020, the commission had made it clear that the BG under Transmission Agreement of January 2019 against NTPC LoA cannot be linked to connectivity applied against SECI LoA and that the petitioners will be required to comply with the provisions of the 2009 Connectivity Regulations and the RE Connectivity Procedure and submit requisite BG in terms of Transmission Agreement to be signed for connectivity applied against SECI LoA.

Therefore, the petitioners’ request to adjust the BG against the Stage-II connectivity in respect of NTPC LoA sought on SECI LoA was not accepted by CERC.

The commission also observed that CTU/PGCIL had not initiated action of encashment of Connectivity BG with respect to NTPC LoA as on date of issue of the Revised Procedure. In a May 2021 hearing, CTU/PGCIL had submitted that as per clause 5.1(3) of the Revised Procedure, Connectivity BG for amount of ₹5 crore submitted under the RE Connectivity Procedure would be treated as Connectivity BG1 for ₹50 lakh and Connectivity BG2 for the balance amount of ₹4.5 crore.

Further, PGCIL had stated that as per clause 5.4.(i) of the Revised Procedure, in the event of encashment of such BGs, if the associated bays(s) at the ISTS sub-station is being constructed by Stage-II grantee itself, amount corresponding to Connectivity BG1 would be forfeited and balance amount (Connectivity BG2) would be refunded.

Keeping in view these submissions, the commission has directed PGCIL/CTU to take action as per the provisions of the Revised Procedure within 15 days of issue of this order.

Finally, during the hearing held in May 2021, the petitioners had said that the BG amount of around ₹50 lakh (being Connectivity BG1) is subject to forfeiture as per the Revised Procedure. The petitioners had requested that CTU may be directed to accept such amount of ₹50 lakh by way of an alternative mode of payment such as a cheque or demand draft instead of encashment of BG of ₹5 crore furnished by Renew Power to recover ₹50 lakh as Connectivity BG1.

The commission has directed that CTU need not encash the BG of ₹5 crore and refund the same to Renew Power. The full order can be accessed here.