In the matter of Procedure for levying compensation charges to achieve milestones under the CERC (Connectivity and General Network Access to the inter-State Transmission System) Regulations – EQ

Summary:

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### Background Statement:
– Under GNA Regulations, Connectivity Applicants must achieve three key milestones:
1. **Submission of land documents** (50% of required land)
2. **Achieving Financial Closure (FC)**
3. **Achieving Commercial Operation Date (COD)**
– Failure to meet timelines results in **revocation of Connectivity** and encashment of Bank Guarantees.
– Many entities have filed petitions seeking additional time. Some are at advanced stages of project implementation.
– CERC has identified the need for a **uniform, transparent procedure** to grant additional time with **compensation charges** (Milestone Extension Charges – MEC), regardless of the reason for delay.

### Legal Basis for Relaxation:
– **Regulation 41 (Power to Relax)** – to remove hardship
– **Regulation 42 (Power to Remove Difficulty)** – to give effect to regulations

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## 💰 Proposed Milestone Extension Charges (MEC)

| Milestone | Base MEC (₹/MW/day) | Maximum Additional Time | Escalation |
|———–|———————|————————|————-|
| **Land Documents** | ₹1,500 | 3 months | Month 2: ₹1,650; Month 3: ₹1,800 |
| **Financial Closure (FC)** | ₹1,500 | 6 months | Month 4: ₹1,650; Month 5: ₹1,800; Month 6: ₹1,950 |
| **COD** | ₹3,000 | 12 months | Months 7-9: +10%/month (₹3,300–₹3,900); Months 10-12: ₹6,000 (200% of base) |

### Payment Terms:
– MEC to be paid **15 days in advance** on a per-day basis.
– If payment fails, Connectivity revoked and BGs encashed.
– If milestone is achieved within the 15-day grace period, **remaining MEC refunded** (without interest).

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## ✅ Eligibility Criteria for Relaxation

### For Land Documents (Reg 11A(1)):
– Must have furnished land documents for **at least 20%** of required land.

### For Financial Closure (Reg 11A(2)):
– **Land BG route:** ≥50% land documents
– **LoA/PPA route:** ≥25% land documents

### For COD (Reg 24.6):
– **Land BG / Land route:** 100% land documents
– **LoA/PPA route:** 50% land documents
– Must have furnished Financial Closure document
– Must furnish EPC contract award details

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## 🕒 Special Provision for COD & GNA Effective Date

**Problem identified:** Developers need time for trial runs and pre-commissioning tests after substation is energized. In some cases, revocation date is triggered immediately on GNA effective date, leaving zero days for these activities.

**Proposed Solution:**
– Entities shall be given **at least 2 months** from GNA effective date to achieve COD **without any MEC**.
– If revocation date falls within 2 months of GNA effective date, MEC for first 2 months is **waived**.
– Total extended time for COD limited to **12 months**.

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## 📋 Key Conditions & Clarifications

| Condition | Detail |
|———–|——–|
| **Multiple milestones** | Separate MEC payable for each milestone. |
| **Application timing** | Entity must approach Nodal Agency **at least 15 days before** original deadline. |
| **Ineligible entities** | Those not meeting eligibility criteria get **no additional time**; Connectivity revoked as per GNA Regulations. |
| **Firm Start Date** | No change – entity remains liable for mismatch charges under Sharing Regulations, 2020. |
| **Use of MEC proceeds** | Credited to **Deviation and Ancillary Services Pool Account** by Nodal Agency. |

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## 💼 Business Points – Key Takeaways for Power Developers

| Business Aspect | Implication |
|—————-|————–|
| **Delays are costly** | MEC can range from ₹1,500 to ₹6,000 per MW per day. For a 500 MW project, that’s ₹7.5 lakh to ₹30 lakh per day. |
| **Plan milestones carefully** | Maximum additional time is limited (3–12 months). After that, Connectivity is revoked and BGs encashed. |
| **Advance payment required** | MEC must be paid 15 days in advance – affects working capital. |
| **Partial progress helps** | Eligibility requires only partial land documents (20-50%) – not 100% – to qualify for extension. |
| **COD extension most expensive** | Base rate ₹3,000/MW/day, escalating to ₹6,000/MW/day beyond 9 months. Strong incentive to commission on time. |
| **Two-month COD grace period** | No MEC for first 2 months after GNA effective date – valuable relief for trial runs. |
| **No change to firm start date** | Even with extension, mismatch charges continue to apply under Sharing Regulations. |
| **Act early** | Must apply at least 15 days before deadline – no last-minute relief. |

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