Govt Amends Bidding Rules, Tightens Default Penalties

The Ministry of Power (MoP) recently announced a series of amendments to the prescribed guidelines for a tariff-based competitive bidding process. These amendments are meant for the procurement of power from grid-connected solar, wind, and hybrid power projects.

The government’s latest notification builds on previous guidelines, including those issued in July 2023 for energy storage projects, in November 2023 for wind power procurement, and in August 2024 for tariff-based bidding guidelines on pumped storage projects (PSPs).

The government’s latest notification outlined location-specific bidding, for renewable energy projects, by allowing procurers to specify the sub-station(s) in Inter-State or Intra-State Transmission Systems where developers can connect their projects. It also sets the energy supply obligation and penalties for generators that fail to maintain the minimum declared Capacity Utilization Factor (CUF) for two consecutive years. The latest notification requires the generator to pay lump-sum damages equivalent to 24 months of tariff for the shortfall. Failure to make the payment may result in PPA termination, along with additional financial liabilities.

Change In Law

The MoP notification added a ‘Change in Law ‘(CIL) clause, aligning with the Electricity (Timely Recovery of Costs Due to Change in Law) Rules, 2021, to ensure cost recovery for developers in case of regulatory changes. It also establishes technical criteria for project implementation. According to the regulations, developers must install GPS-enabled Automatic Weather Stations (AWS) for real-time monitoring. Compliance with cybersecurity regulations is also mandatory.

The notification stated, “Some of the common provisions modified included the rule on “Change In Law”, to include the following provision, “: The provisions for Change in the law shall be under the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021 and amendments thereof issued from time to time. Further, the term Change in Law (“CIL”) shall refer to the occurrence of any event related to the project from seven days before the last date of Bid Submission” 

Timeline

The guidelines also define a timeline for the signing of the Power Purchase Agreement (PPA) and Power Sale Agreement (PSA) for Wind, solar, and hybrid projects. The new clause mandates that the agreements be completed within 30 days of issuing the Letter of Award (LoA). It also allows for an extension of up to 12 months, beyond which the LoA will be canceled.

The notification stated, “In normal circumstances, the signing of the PPA and PSA (if applicable) should be completed within 30 (thirty) days from the issuance of the LoA. This period may be extended up to 12 months from the LoA date, beyond which the LoA will be cancelled.”

For tariff adoption, within wind, solar, and hybrid projects, the rule requires procurers to submit discovered tariffs for regulatory approval within 30 days after bidding. The rule also introduces a new financial security instrument—Insurance Surety Bonds—which can now be used as an alternative to Bank Guarantees for Earnest Money Deposit (EMD) and Performance Bank Guarantee (PBG). The rule also addresses deviations from standard guidelines: “Any deviation requires prior approval from the regulatory commission within 60 days. If deviations were approved before these amendments, fresh approvals are not required.”

Payment Security Fund

In addition to the other remedies, this PBG (or alternatives provided thereto as per these Guidelines) can be encashed to recover any damages/dues of the generator in terms of the PPA. the rule clarified “The damages/dues recovered by the Intermediary Procurer by encashing the PBG, upon the default of the generator under the PPA, shall be credited to the Payment Security Fund to be maintained by the Intermediary Procurer under Clause 6.3 of these Guidelines.”

Additionally, the PBG (or alternatives provided thereto as per these Guidelines) shall be returned to the generator within 45 days of the actual commencement of supply date of the project. In case of part commencement of supply of power, PBG corresponding to such part capacity should be released within 45 days of the actual commencement of supply date.”