PPA Termination Does Not Discharge Transmission Obligations Under Section 79 of the Electricity Act: CERC Rules

Independent Obligations: CERC Upholds Transmission Fee Liability Despite PPA Termination

In a significant ruling for the renewable energy sector, the Central Electricity Regulatory Commission (CERC) has clarified the legal boundaries between Power Purchase Agreements (PPAs) and Transmission Service Agreements (TSAs). The commission, led by Chairperson Jishnu Barua and Members Ramesh Babu V., Harish Dudani, and Ravinder Singh Dhillon, ruled that the termination of a PPA due to alleged force majeure does not automatically absolve a generating company of its liabilities under separate transmission agreements.

The Backdrop of the Dispute

The petition, brought by ReNew Wind Energy (AP2) Private Limited and its parent company, ReNew Power Private Limited (RPPL), stemmed from a long-standing dispute over transmission charges. The developers had entered into multiple agreements with the Central Transmission Utility of India Ltd. (CTUIL) for the evacuation of power from their 100 MW wind project in Kutch, Gujarat.

The developers argued that external factors, specifically changes in land allotment policy by the Government of Gujarat and the COVID-19 pandemic, rendered the project impossible to complete. Having terminated their PPA with the Solar Energy Corporation of India (SECI) in February 2022, they sought a declaration that their obligations under the Long-Term Access (LTA) and Bipartite Connection Agreement (BCA) were similarly discharged.

Conflicting Perspectives

ReNew argued that their transmission arrangement and PPA were parts of a single "composite transaction." They contended that when the PPA was frustrated, the transmission infrastructure requirements vanished, making the levy of charges by CTUIL arbitrary. They heavily relied on the Supreme Court ruling in Ameet Lalchand Shah v. Rishabh Enterprises to argue that interconnected agreements must be treated as a whole.

CTUIL, however, maintained a starkly different view. They argued that generation and transmission are distinct functions. The utility contended that developers are responsible for assessing and providing the start date for LTA, regardless of their progress on construction. For CTUIL, the PPA is simply a commercial contract to which they are not a party, and obligations under the BPTA (Bipartite Transmission Agreement) remain binding despite any internal operational setbacks faced by the generator.

CERC's Legal Analysis: A Clear Distinction

The Commission observed that the LTA and PPA operate in entirely different spheres. CERC emphasized that the liability to pay transmission charges is a regulatory requirement rooted in the reservation of ISTS (Inter-State Transmission System) capacity, not a derivative of the success or failure of a specific PPA.

CERC also clarified that the Ameet Lalchand Shah judgment could not be extended to regulatory liability cases, as the facts in that case were limited to the arbitration of composite commercial transactions. Furthermore, CERC noted that the waiver of transmission charges, as per Ministry of Power orders, strictly applies to the generation and sale of power, not as an exemption for delayed projects.

Key Observations

The judgment is characterized by a strong emphasis on regulatory compliance and the independence of contractual obligations:

• "RfS/PPA and LTA Agreement are two entirely different and distinct agreements and the liabilities and obligations contained therein are also different."
• "The grant and operationalisation of LTA are based on the request of the LTA applicant and are not contingent upon the subsistence of the PPA."
• "The entire provision is for waiver of transmission charges after COD of the generating station. Nowhere it is provided that a generator which has not declared COD would not be levied transmission charges as per extant regulations."
• "The transmission charges are to be paid by the beneficiaries in accordance with the Sharing Regulations prevailing at the time the LTA was operationalised."

Final Ruling and Implications

The CERC dismissed the Petitioners' pleas, solidifying the precedent that developers cannot use PPA termination to escape their transmission commitments. The Commission directed the recovery of transmission charges in accordance with the 2010 and 2020 Sharing Regulations depending on the applicable timeframes.

This decision serves as a firm reminder to renewable energy developers: the start date and capacity of LTA requested in applications represent binding commitments to the transmission utility. Companies must plan their infrastructure and operational timelines for transmission access as an independent financial risk, distinct from the potential termination or frustration of their power sales contracts.