Legal Angle

Benchmark regulatory rulings on open access highlight key issues

Open access regulations, both at the state and central levels, are subject to frequent arbitration due to several reasons. Some of these are related to grant of connectivity, duration of open access, long-term access (LTA) and inter- and intra-state transmission. Poor transmission connectivity is currently the biggest hurdle in renewable capacity addition in the country. In addition, the terms and conditions for open access are often subject to different interpretations, leading to a need for intervention by regulators. Cross-subsidy surcharge (CSS) is also a bone of contention between the regulatory commissions and renewable energy suppliers. Despite the Central Electricity Regulatory Commission’s (CERC) exemption of renewable energy projects from CSS, many states continue to impose the surcharge.

Renewable Watch analyses select recent rulings by regulatory commissions that highlight the key problems in the renewable energy-based open access segment.

Change in ownership of transmission connectivity

Suzlon Power Infrastructure Limited (Suzlon) had filed a petition with the CERC against Power Grid Corporation of India Limited (Powergrid), Solar Energy Corporation of India (SECI), Ministry of New and Renewable Energy, and a consortium of 20 developers including Green Infra Wind Energy Limited (GIWEL). The petitioner requested the commission to direct Powergrid to allow the utilisation of 300 MW of transmission connectivity and LTA to its Chandragiri Wind Farm for the 249.9 MW wind power project awarded by SECI to Suzlon’s consortium with GIWEL.

However, Powergrid rejected Suzlon’s request on the grounds that this would entail transferring connectivity from one legal entity to another. The petitioner submitted that the refusal to grant connectivity was contrary to the provisions of the Connectivity Regulations, 2009, which state that connectivity will be valid as long as there are no changes in the physical attributes of the generating station. A mere change in the ownership of the plant should not affect the legality of the permissions. Suzlon further added that in order to facilitate the timely completion of the project, Powergrid needs to allow the GIWEL-Suzlon consortium to use the connectivity granted to Suzlon for the Chandragiri Wind Farm. According to Suzlon, the commission has the power to relax any provision of the detailed procedure for the transfer of connectivity.

Powergrid responded by saying that since there were enough bays available, there was no need to alter the transmission priority of any plant. It further added that while a change in shareholding of the generating station may not affect connectivity, it cannot be interpreted to mean that the generating station can accommodate several independent power producers. Since the consortium undertook the risk of participating in the competitive bidding process undertaken by SECI without securing connectivity to the project, the obligation to obtain connectivity rested with the consortium.

The commission’s analysis and decision attempts to answer a critical question, whether the company granted transmission connectivity and LTA should be allowed to transfer it to a third party. It observed two key facts. First, after being granted connectivity and LTA, Suzlon had not utilised it. Second, Suzlon sought to transfer the transmission connectivity to a consortium, wherein Suzlon itself was merely a 1 per cent shareholder. According to the commission, the transfer of connectivity from Suzlon to the consortium led by GIWEL will be tantamount to trading and thus against the spirit of the Electricity Act, 2003. With these observations, in an order released on March 8, 2018, the CERC rejected Suzlon’s petition and ruled in favour of Powergrid and others.

Optimisation of evacuation system

In 2016, Adani Green Energy Limited (AGEL) filed a petition with the CERC against Powergrid for the grant of transmission connectivity and LTA by the latter to the former without proper consideration of its plans to optimise the evacuation system. AGEL sought grant of transmission connectivity and LTA for its proposed wind projects of 1,000 MW and 500 MW and a solar project of 750 MW to Powergrid’s Bhuj Pool substation. The connectivity  was duly granted by Powergrid. However, in January 2017, AGEL requested Powergrid to change the connectivity in order to optimise the evacuation system by providing two lines of 1,000 MW wind and 1,250 MW of wind and solar. The revision was granted by Powergrid only to be revoked later on the basis of the commission’s order to prevent underutilisation of bays for the connectivity granted to wind and solar power projects. AGEL was then asked to sign an LTA agreement within one month as per the connectivity granted earlier. However, AGEL argued that the lines had been granted without due consideration of the optimisation proposal and therefore it required more time.

In accordance with the relevant clauses of the renewable energy connectivity procedure, Powergrid had issued letters to AGEL revoking its earlier grant of connectivity and and granted Stage I connectivity for its projects. As a result, AGEL requested Powergrid to return the bank guarantees, but the request was rejected by the latter on the grounds that the previous LTA had not yet been annulled and that the LTA grants are in abeyance as they are awaiting Stage-II connectivity.

The commission analysed the case to determine the impact of the renewable energy connectivity procedure on LTA applications. It ruled that since AGEL had been granted LTA prior to the connectivity procedure but had not yet signed the bay implementation agreement, AGEL had become a deemed Stage I connectivity grantee, and had 24 months to apply for Stage II connectivity. Therefore, the application bank guarantees will no longer be alive and the notice by Powergrid directing AGEL to sign the LTA and connectivity agreement will now stand ineffective. However, the commission refrained from providing generic directions to Powergrid in such matters and decided to review the cases on their specificities.

Redetermination of CSS

The Open Access Users Association (OAUA) had filed a petition against Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) to redetermine the CSS up to a ceiling of 20 per cent of the tariff set for the relevant consumer category in accordance with the National Tariff Policy (NTP). The OAUA stated that the Supreme Court had held in an earlier judgement that the NTP is a binding statutory document.

TANGEDCO had responded that the CSS will be progressively reduced in the manner specified by the state electricity regulatory commission. It further said that the NTP reflects this sentiment and requires the appropriate commissions to notify a roadmap to bring such tariffs within the range of 20 per cent of average cost of supply (ACoS). The roadmap will also include immediate milestones. Therefore, the determination of CSS within this range could not be effected immediately.

The Tamil Nadu Electricity Regulatory Commission’s (TNERC) rulings are critical to address questions regarding the reduction of CSS as per NTP and whether the NTP is a binding force or not. In its analysis, TNERC maintains that CSS can be reduced only when a reduction is effected in the cross-subsidy. Further, it is of the view that the NTP is only a guiding force and not binding on state commissions. The commission has already implemented the NTP as directed by the Appellate Tribunal for Electricity for the reduction of CSS to 20 per cent of ACoS, although in a phased manner. Therefore, the commission did not see merit in OAUA’s petition, and hence rejected it.

Conclusion

The cases studied here attempt to address the key issues that may hamper the growth of the open access segment and the renewable energy sector. These arbitrations are likely to serve as benchmarks for resolving similar conflicts in the future in order to ensure smoother functioning of the system.

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