CERC Approves NHPC’s 3000 MW Solar Tariff Amid Regulatory Delays

The Central Electricity Regulatory Commission (CERC) has officially approved the tariff adoption for NHPC’s 3000 MW solar power projects, despite expressing strong disapproval of the 10-month delay in filing the petition.

The commission ruled that NHPC’s competitive bidding process was transparent and compliant with the Ministry of Power’s Solar Guidelines. However, it dismissed requests for project deadline extensions and compensation claims due to cost escalations arising from increased Basic Customs Duty (BCD), Additional Customs Duty (ADD), and Goods and Services Tax (GST).

NHPC initiated the competitive bidding process in June 2023, attracting 16 participants, including major developers such as Avaada Energy, Sprng Energy, and Hinduja Renewables. The e-reverse auction was conducted in November 2023, with the final tariffs discovered in the range of INR 2.53/kWh to INR 2.60/kWh. As per Clause 10.4 of the Solar Guidelines, NHPC was required to file the tariff adoption petition within 15 days of the auction, meaning the deadline was November 22, 2023. However, NHPC delayed the filing until September 2024, citing difficulties in securing Power Purchase Agreements (PPAs) with state DISCOMs.

NHPC explained that the delay was due to state reluctance to procure additional solar power amid a surplus, leading to prolonged negotiations. Eventually, PPAs were secured with Uttar Pradesh Power Corporation Limited (UPPCL) and Maharashtra State Electricity Distribution Company Limited (MSEDCL) between March and July 2024. NHPC argued that the delay was unavoidable and necessary to ensure proper contractual agreements.

The CERC acknowledged NHPC’s explanation but emphasized that strict adherence to timelines is critical for maintaining regulatory certainty in the renewable energy sector. The commission noted that in previous cases, tariff adoption had proceeded even before PPAs were finalized to avoid such delays.

The commission officially approved the discovered tariffs, allowing NHPC to move forward with the financial closure of the projects. However, it imposed a strict condition on the trading margin of INR 0.07/kWh, stating that if NHPC fails to provide the required Letter of Credit (LC) under the Trading Licence Regulations, the trading margin would be reduced to INR 0.02/kWh.

The commission’s approval allows NHPC to proceed with the development of the 3000 MW solar projects in Rajasthan, which are expected to be commissioned by 2026-27. The projects have been allocated 1525 MW to UPPCL and 1475 MW to MSEDCL, as per the executed Power Sale Agreements (PSAs).

While the tariff adoption was approved, several developers raised concerns over cost escalations due to regulatory changes. Hazel Hybren Private Limited (HHPL) and Green Infra Clean Wind Technology Limited (GICWTL) argued that the imposition of ADD, BCD, and GST after bid submission significantly increased project costs, making their financial models unviable. They sought 'Change in Law' recognition, which would allow for compensation.

Additionally, developers flagged grid connectivity issues. HHPL had originally applied for connectivity at the Bikaner-III substation but was later reassigned to Bikaner-IV due to capacity constraints. This change pushed the commissioning timeline to September 2026, beyond the scheduled completion date. HHPL requested an extension of its commissioning deadline to align with the new grid connectivity schedule.

CERC rejected the requests for project timeline extensions, stating that Clause 10.5 of the Solar Guidelines allows extensions only when the commission itself delays tariff adoption and not when the petitioner (NHPC) causes the delay. Since NHPC’s late filing was the issue, the developers’ deadline extension requests were dismissed.

Similarly, the commission ruled that cost escalations due to regulatory changes should be addressed through separate petitions rather than being included in the tariff adoption proceedings. It stated that while increased duties and taxes impact project costs, these concerns fall outside the scope of the present petition and should be adjudicated individually.

The Maharashtra State Electricity Distribution Company Limited (MSEDCL) also raised objections, filing a separate petition with the Maharashtra State Electricity Regulatory Commission (MERC) regarding tariff adoption. MSEDCL argued that if project commissioning extends beyond June 2026, transmission charges could exceed the 25 percent threshold, leading to financial burdens on DISCOMs. The company insisted that any deadline extensions should not impact transmission costs.

CERC acknowledged MSEDCL’s concerns but clarified that ISTS charges and losses will be determined as per existing CERC regulations. The commission allowed MSEDCL to submit a formal reply and permitted NHPC to file a rejoinder on the issue.

In response to the concerns, NHPC maintained that its bidding process was transparent and complied with the Ministry of Power’s Solar Guidelines. It submitted certifications confirming that the bid documents did not deviate from the guidelines issued on July 28, 2023. The Bid Evaluation Committee (BEC) validated that the tariffs were reasonable under Clause 10.2 of the guidelines.

NHPC reiterated that requests for timeline extensions and cost escalations were beyond the scope of the present petition. It emphasized that PPAs govern payment obligations and contractual relationships and that ISTS charges would be applicable as per existing regulations.

With the approval of the tariff adoption, NHPC and the selected solar power developers can now proceed with project execution and financial closure. However, the commission’s ruling highlights the regulatory uncertainties and financial risks developers face in India’s renewable energy sector. The dismissal of 'Change in Law' claims means developers may have to pursue separate legal avenues to recover increased costs due to duty hikes and taxation changes.

Additionally, the strict trading margin condition imposed on NHPC signals greater regulatory scrutiny on compliance with financial security requirements in power trading. If NHPC fails to provide the necessary LC, the trading margin reduction could impact its revenue model.

The decision also reinforces the importance of timely regulatory approvals in large-scale renewable energy projects. While NHPC successfully secured tariff adoption, its delayed filing resulted in financial uncertainties for developers and lenders, affecting project timelines. Future cases may see stricter enforcement of compliance deadlines to prevent such delays.

The CERC’s approval of NHPC’s 3000 MW solar project tariff adoption marks a crucial step in the project’s progress but also underscores the challenges in India’s renewable energy sector. While the tariffs were validated, concerns over cost escalations, grid connectivity delays, and transmission charges remain unresolved. The rejection of deadline extensions and 'Change in Law' claims places additional financial pressure on developers, who may need to seek alternative legal or regulatory remedies.