CERC Rules Against Power Grid, Provides Relief to Solar Developer in Madhya Pradesh

Notice issued by Power Grid to terminate Transmission Service Agreement has been quashed


The Central Electricity Regulatory Commission (CERC) has quashed a transmission service agreement (TSA) termination notice that was issued by the Power Grid Corporation of India Limited (PGCIL) to SEI Sunshine Power Private Limited. The CERC has also quashed two letters issued by PGCIL to SEI regarding long-term access (LTA) to its transmission system.

SEI Sunshine Power Private Limited is a subsidiary of Greenko Group.

The CERC was hearing a petition filed by SEI Sunshine Power Private Limited seeking direction to quash the letters and TSA termination notice dated October 3, 2018, issued by PGCIL.

SEI Sunshine Power Private Limited is setting up six solar PV projects of 30 MW, aggregating 180 MW in the state of Madhya Pradesh. PGCIL granted the agreement to the solar project developer after following the due process. The LTA was to be operationalized either from September 30, 2016 or from the date of availability of the specified transmission system, whichever was later.

After the LTA, the developer and PGCIL executed Long Term Access Agreement (LTAA) and TSA dated August 26, 2016.

On March 28, 2018, PGCIL informed the solar project developer about the operationalization of LTA and to deposit letter of credit (LC) amounting to ₹77.5 million (~$1.12 million) towards payment security mechanism. The solar project developer requested PGCIL to operationalize the LTA in line with the completion of the specified transmission system. SEI Sunshine Power Private Limited also informed PGCIL that solar PV projects are exempted from making any payment towards transmission charges and losses and therefore, there is no requirement for opening any letter of credit towards the payment security mechanism.

The PGCIL issued another letter on March 29, 2018, requesting the letter of credit to be opened for payment security mechanism.

While going through the submissions made by both the parties, the commission stated that the decision of PGCIL to operationalize the LTA without commissioning the entire transmission system is not in line with the LTA agreement. PGCIL’s decision to invoke the second provision to clause (5) of Regulation 8 of the Sharing Regulation is not applicable.

The second provision addresses the situation where the operationalization of the LTA is contingent upon commissioning of several transmission lines, and only some of the transmission lines have been declared commercially operational. In such a case, the obligations of the generator to pay the transmission charges is to the extent of LTA operationalized corresponding to the transmission system commissioned. Stating this, CERC set aside letter dated March 28, 2018.

The CERC also observed that in the event the entire transmission system gets commissioned, and still, the developer fails to declare the commercial operation of its generating station, it will be liable to pay the transmission charges and will also be liable to open the letter of credit towards the payment security mechanism until the commissioning of its generating station. With this, CERC set aside another letter dated March 29, 2018.

The commission also stated that the solar project developer is not obliged to open the letter of credit and therefore the TSA termination notice October 3, 2018, will also be set aside.

This decision sets positive precedence for developers in the future facing similar situations.

Recently, the CERC set generic tariffs for the purchase of electricity from a host of renewable energy generation sources during the financial year (FY) 2019-20.