CERC Lists Conditions for Waiver of Bank Guarantee for Long-Term Access Applicants

Emphasizes the importance of power sale agreements in granting LTA


Power Grid Corporation of India Limited (PGCIL) filed an instant application requesting the Central Electricity Regulatory Commission (CERC) to provide clarity on the exemption of construction phase bank guarantee (BG) for an applicant who fulfills the exemption eligibility criteria for long-term access (LTA) of power.

This petition comes on the heels of an application filed by ACME Solar Holding Limited to exempt the bank guarantee for four separate LTA applications.

The application was for 300 MW each for its Fatehgarh-III & IV solar projects. ACME sought a review of the requirement to submit construction phase bank guarantee by an LTA applicant, which already has a power purchase agreement (PPAs) in place.

Later, PGCIL sought clarification as to whether the requirement to provide the construction phase bank guarantee can be waived off for an applicant who signs a PPA after the submission of the LTA application.

PGCIL added that ACME had submitted the copies of two PPAs of 300 MW each against its LTA applications and requested the central utility to consider them for granting LTA.

Also, PGCIL submitted that the construction phase bank guarantee is mainly required to cover the risk of inter-state transmission licensee during the construction phase of generators (for which transmission system is being constructed) since the PPA is operative only after the project is commissioned. So, the signing of the PPA does not mitigate the risk of inter-state transmission licensees during the construction phase of generators for its delay, failure, exit, abandonment, or relinquishment of LTA.

It further stated that in several cases of wind and solar projects awarded through competitive bidding, PPAs are signed with intermediary agencies such as Solar Energy Corporation of India Limited (SECI) or NTPC, who, in turn, enter into back-to-back PSAs with the beneficiaries. In such cases, where the PPA has been signed by an intermediary agency like SECI or NTPC with the LTA applicant, it should be supported by a back-to-back power sale agreement (PSA) with the beneficiaries so that a clear connection is established for the supply of power by the generating station to the beneficiaries. The signing of PSAs assumes greater significance in view of the cancellation of PPAs on a few occasions due to the non-signing of PSAs.

The Commission observed that, if the applicants who already have an entity to which the power is to be supplied or procured, the applicant will not be required to submit the construction stage bank guarantee with the application form. The same relaxation has been given to inter-state generating stations owned by the central government and ultra-mega power projects.

The provisions are subject to a few conditions:

  • Augmentation of the transmission system will be undertaken only after the agreement by the beneficiaries in the standing committee or regional power committee.
  • The long-term access agreement in such cases will be directly signed by the beneficiaries with PGCIL or tripartite agreement with PGCIL and an inter-state transmission licensee.

The Commission observed that despite PPAs having been signed between generators and intermediary agencies, PSAs have not become a reality in several cases. Therefore, it stated that in the absence of PSAs between the intermediary agency with beneficiaries, this benefit cannot be availed.

Accordingly, the Central Electricity Regulatory Commission has directed the PGCIL that the construction phase BG cannot be waived off for ACME Solar since it did not fulfill the conditions. HSA Advocates appeared for the developers.

CERC ordered that, if PPA is signed between LTA applicant and beneficiaries or between LTA applicant and intermediary agency with back to back PSA with the beneficiaries, the construction phase BG doesn’t have to be furnished for the quantity for which such PPA or PPA with back-to-back PSA has been signed with beneficiaries.

In case any application BG or construction phase BG is furnished by the LTA applicant, BG corresponding to the quantity, for which PPA or PSA with beneficiaries has been signed and submitted to central transmission utility, will be returned to such LTA applicant.

Recently, PGCIL invited bids to establish transmission systems to evacuate power from solar energy zones in Rajasthan. The invitation was issued under phase II, part-A of the transmission program for the evacuation of power from solar energy zones in Rajasthan (8.1 GW).

Previously, the CERC gave a transmission license to Powergrid Bhuj Transmission Limited (PBLT) to build transmission systems for 2 GW of renewable energy projects in Gujarat. The PBLT is a subsidiary of PGCIL.

Anjana is a news editor at Mercom India. Before joining Mercom, she held roles of senior editor, district correspondent, and sub-editor for The Times of India, Biospectrum and The Sunday Guardian. Before that, she worked at the Deccan Herald and the Asianlite as chief sub-editor and news editor. She has also contributed to The Quint, Hindustan Times, The New Indian Express, Reader’s Digest (UK edition), IndiaSe (Singapore-based magazine) and Asiaville. Anjana holds a Master’s degree in Geography from North Bengal University, and a diploma in mass communication and journalism from Guru Ghasidas University, Bhopal.