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					</table>The Central Electricity Regulatory Commission (<a href="https://www.cercind.gov.in/" target="_blank" rel="noopener">CERC</a>) has adopted a usage charge of ₹2.45 (~$0.0272)/kWh for the 510 MW solar power project developed by NLC India.
The Commission held that this usage charge qualifies for adoption under Section 63 of the Electricity Act, 2003, as it corresponds to the ceiling usage charge that was in effect at the time of the competitive bidding.
Background 
NLC India filed the petition seeking adoption of usage charges for its 510 MW solar project selected under Tranche III of the Central Public Sector Undertaking (CPSU) Program Phase II (Tranche III).
The bidding process was conducted by the Indian Renewable Energy Development Agency (IREDA) acting as the bid process coordinator on behalf of the Ministry of New and Renewable Energy.
Under the CPSU program, viability gap funding (VGF) per megawatt was the sole bid parameter, while usage charges were subject to a pre-specified ceiling. At the time of the tender and e-reverse auction, the ceiling usage charge was set at ₹2.45 (~$0.0272)/kWh, and the maximum permissible VGF was capped at ₹5.5 million (~$60,931)/MW.
Under the CPSU program, usage charges are not competitively discovered power tariffs but government-capped charges intended to recover project costs after VGF, payable on a per-unit basis for use of the generating asset.
NLC India <a href="https://www.mercomindia.com/ntpc-sjvn-nhpc-nlc-ircon-win-iredas-5-gw-cpsu-auction" target="_blank" rel="noopener">emerged</a> as one of the successful bidders and was issued a letter of award for an allocated capacity of 510 MW. Following the allocation, the petitioner approached various state distribution companies to sell power on a long-term basis.
Power usage agreements were subsequently executed with Rajasthan Urja Vikas Nigam for 300 MW at a usage charge of ₹2.52 (~$0.0279)/kWh and with Telangana distribution companies for 200 MW at a usage charge of ₹2.57 (~$0.0285)/kWh.
These agreements were approved in principle by the respective state electricity regulatory commissions, subject to the CERC&#8217;s adoption of the tariff.
The petitioner submitted that the increase in usage charges above ₹2.45 (~$0.0272)/kWh was necessitated by a change in the goods and services tax (GST) rate applicable to renewable energy equipment.
The Ministry of Finance revised the applicable tax rate from 5% to 12%, which the Ministry of New and Renewable Energy later acknowledged as a change in law.
Consequently, the ceiling usage charge under the CPSU program was revised upward to ₹2.57 (~$)/kWh.
NLC India argued that the usage charges reflected in the power usage agreements were within the revised ceiling and should therefore be adopted by the Commission.
IREDA supported the petitioner&#8217;s case by confirming that the bidding process had been conducted in strict compliance with the CPSU program guidelines and Section 63 of the Electricity Act. It submitted conformity certificates and audit approvals to establish that the e-procurement process was transparent, competitive, and compliant with government standards.
Commission’s Analysis 
The Commission noted that under Phase II of the CPSU program, the competitive element of the bidding process lay exclusively in the VGF quoted by bidders and not in the usage charge itself. Usage charges were subject only to a government-determined ceiling.
The Commission observed that at the time of bidding and issuance of the letter of award, the ceiling usage charge notified to all bidders was ₹2.45 (~$0.0272)/kWh. The maximum permissible VGF was ₹5.5 million (~$60,931)/MW was directly linked to this ceiling. Any post-bid alteration to the usage charge ceiling, even if permitted under the program, could not retrospectively modify the tariff eligible for adoption under Section 63.
Relying on its earlier decisions in similar cases, the Commission reiterated that mutual agreements between generators and procurers on usage charges cannot be equated with tariff discovery through competitive bidding when such charges were not themselves bid parameters.
The Commission emphasized that allowing the adoption of post-bid revised usage charges would erode the integrity of the competitive bidding process and create uncertainty for future tenders.
At the same time, the Commission recognized that the increase in GST constituted a change in law event under the terms of the power usage agreements.
While such a change in law impacts cannot be absorbed into the adopted tariff under Section 63, affected parties are entitled to seek separate compensation to restore them to the same economic position they would have been in had the change not occurred.
Balancing these considerations, the Commission adopted the usage charge of ₹2.45 (~$0.0272)/kWh for the entire 510 MW project as the tariff under Section 63.
Simultaneously, it allowed NLC India to provisionally recover change-in-law compensation related to the GST increase, subject to final determination in a separate petition to be filed by the petitioner within the stipulated timeframe.
In September last year, the Commission <a href="https://www.mercomindia.com/cerc-allows-nhpc-to-adopt-usage-charges-of-%E2%82%B92-45-for-selling-solar-power/" target="_blank" rel="noopener">allowed</a> NHPC to adopt usage charges of ₹2.45 (~$0.029)/kWh under the competitive bidding process to procure 1,000 MW of solar power under the CPSU Phase II (Tranche III).
Subscribe to Mercom&#8217;s real-time <a href="https://www.mercomindia.com/product/mercoms-renewable-energy-regulatory-updates" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don&#8217;t miss any critical updates from the renewable industry.

CERC Adopts Usage Charges of ₹2.45/kWh for NCL India’s 510 MW Solar Project

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					</table>The Central Electricity Regulatory Commission (<a href="https://www.cercind.gov.in/" target="_blank" rel="noopener">CERC</a>) has allowed <a href="https://www.nhpcindia.com/" target="_blank" rel="noopener">NHPC</a> to adopt the usage charges of ₹2.45(~$0.029)/kWh under the competitive bidding process to procure  1,000 MW of solar power under the CPSU Phase II (Tranche III) program.
Background  
The Ministry of New and Renewable Energy (<a href="https://mnre.gov.in/" target="_blank" rel="noopener">MNRE</a>) notified the CPSU Phase II program to set up 12,000 MW grid-connected solar projects with Viability Gap Funding (VGF) at the modified cap on usage charges at ₹3.50-2.80(~$0.04-0.033)/kWh.
Coincident with modifying the cap on usage charges, MNRE declared Indian Renewable Energy Development Agency (IREDA) as the implementing agency instead of the Solar Energy Corporation of India.
IREDA issued a Request for Selection (RfS) for setting up 5,000 MW grid-connected solar PV projects under Tranche III in January 2021.
As per the RfS, the power generated from government power producers should be for self-use or use by government/ government entities directly or through the distribution licensees on payment of mutually agreed usage charges of not more than ₹2.20(~$0.02)/kWh.
The usage charges will exclude other third-party charges like wheeling and transmission charges and losses, point of connection charges and losses, cross-subsidy surcharges, and SLDC/RLDC Charges.
MNRE amended the program guidelines in May 2021, capping the usage charges at ₹2.45 (~$0.029)/kWh and revised the VGF to ₹5.5 million (~$65,512.82)/MW from ₹7million (~$83,379.95)/MW. The commissioning schedule for the project was also revised from 24 months to 30 months.
NHPC was declared a successful bidder through an e-reverse auction and was allocated solar projects with an aggregate capacity of 1,000 MW.
Further, the NHPC asked various states/DISCOMs to procure solar power. The DISCOMS of Telangana, West Bengal, and Punjab conveyed their consent to procure solar power in the long term.
NHPC entered into Power Usage Agreements with three state DISCOMs — Punjab, West Bengal, and Telangana- for solar power supply at ₹2.45 (~$0.029)/kWh.
NHPC requested IREDA to approach the Commission to approve the adoption of usage charges of ₹2.45 (~$0.029)/kWh agreed upon in the competitive bidding process with an additional maximum VGF of ₹4.5 million (~$53,603.69)/MW. However, IREDA refused the request and asked the procurer to approach the Commission instead.
Commission’s analysis
Citing Section 63 of the Electricity Act, 2003, the Commission stated that it could adopt the tariff determined in the bidding process, provided it has taken place transparently and according to the government’s guidelines.
The Commission said that in an earlier case, the mutually agreed usage charges were lower than the prevailing ceiling usage charges of ₹3.50 (~$0.04)/kWh. However, it allowed the prevailing ceiling usage charges, recognizing that the bid process had been conducted with VGF as a bid parameter.
The Commission noted that the usage charges under PUAs are equivalent to those prevailing after the bid process in the present case.
It noted that MNRE also increased maximum usage charges to ₹2.57 (~$0.03)/kWh for projects awarded under Tranche III due to increased GST rates for manufacturing renewable energy devices and parts.
The Commission allowed the adoption of the usage charges of ₹2.45 (~$0.029)/kWh by NHPC as they are equivalent to the ceiling usage charges prevailing during the bid process.
In March 2024, the Commission <a href="https://www.mercomindia.com/cerc-approves-tariffs-ntpc-solar-projects" target="_blank" rel="noopener">approved</a> tariffs discovered through competitive bidding for NTPC’s procurement of 1,250 MW power from grid-connected solar power projects under the “Program for Flexibility in Generation and Scheduling of Thermal/Hydro Power Stations through Bundling with Renewable Energy and Storage Power.”
In February 2024, the regulator <a href="https://www.mercomindia.com/cerc-unveils-draft-renewable-regulations-2024" target="_blank" rel="noopener">formulated</a> the draft regulations to determine the tariff for renewable energy projects.

CERC Allows NHPC to Adopt Usage Charges of ₹2.45 for Selling Solar Power

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