In a recent order, the Central Electricity Regulatory Commission (CERC) decided that $5 million ($66,299) of the connection bank guarantee for each of the two 250 MW solar projects in Andhra Pradesh and Tamil Nadu should be forfeited.
The Power Grid Corporation of India Limited shall return the balance of 45 million rupees ($596,692) for each project to the solar developer (PGCIL). PGCIL had canceled the solar developers’ Stage-II connectivity after the Telangana State Electricity Regulatory Commission refused to authorize the power purchase agreements (PPAs) for the two projects (TSERC).
The PPAs had been terminated by the solar developer and the Telangana distribution companies (DISCOMs).
Shapoorji Pallonji Infrastructure Capital Company had filed a lawsuit to have two connection bank guarantees of 100 million rupees ($1.33 million) provided by the developer to PGCIL under the TSA inked between the two parties discharged.
Background of The Whole Scenario
The National Thermal Power Corporation (NTPC) had issued a call for developers to create 2,000 MW of solar projects connected to the interstate transmission system (ISTS). In the reverse auction, Shapoorji Pallonji was one of the winners.
A letter of intent was provided to the developer in October 2018 for the development of two solar projects with capacities of 250 MW each in Anantapur, Andhra Pradesh, and Tuticorin, Tamil Nadu.
The Telangana DISCOMs and NTPC signed a power sale agreement (PSA) on March 11, 2019. The developer then used NTPC to execute the PPAs on March 20, 2019.
The developer then requested Stage-I connectivity for its proposed 500 MW solar power plants in Tuticorin and Anantapur, which PGCIL approved.
The developer afterward sought Stage-II connectivity for the projected solar power installations, which PGCIL approved. On February 12, 2019, the petitioner and PGCIL signed transmission service agreements.
The Telangana DISCOMs were required to get TSERC approval of their separate PPAs within 60 days of the PPAs’ effective date, according to the PPAs’ terms. Despite NTPC’s offer of a three-month extension, TSERC did not approve the PPAs, and the PPAs were canceled.
Following the termination of the PPAs, the developer requested that PGCIL withdraw the Stage-II connection for the two solar projects. PGCIL canceled the developer’s Stage-II connectivity in response to the request.
According to PGCIL’s position, there was no provision for the return of the connectivity bank guarantee in the full procedure for the grant of connectivity or in the transmission service agreement.
The developer’s regulatory implications on the treatment of the connectivity bank guarantees in such a circumstance had not been supplied in the detailed procedure, according to PGCIL, even though the petitioner’s Stage-II connectivity had been canceled.
Commission’s Analysis
According to the updated detailed procedure, a connectivity bank guarantee provided under the detailed method (pre-revised) should be classified as Conn-BG1 for the first $5 million ($66,299) and Conn-BG2 for the remainder.
Furthermore, the sum corresponding to Conn-BG1 should be lost if the Stage-II grantee was constructing the related bay at the ISTS substation, according to the amended detailed method.
The remaining balance (which will be considered as Conn-BG2) should be repaid. We note that the developer’s Stage-II connectivity was canceled by PGCIL in a letter dated March 4, 2020.
It had not, however, taken any steps to encash the bank guarantee by the established protocol (pre-revised).
As a result, every action involving the encashment of a connectivity bank guarantee must be handled under the amended detailed procedure, according to the Commission.
Taking into account all of the evidence, the CERC ordered PGCIL to forfeit $5 million ($66,299) in connectivity bank guarantees and return $45 million ($596,692) for each project.
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Resource: Mercom India
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