Non-Compliance with Bank Guarantee Norms Justifies Cancellation of Connectivity: CERC Upholds CTUIL’s Decision - 2025-03-30

CERC Upholds Cancellation of Avaada Energy’s Connectivity for Non-Compliance with Bank Guarantee Norms

New Delhi – March 30, 2025 – The Central Electricity Regulatory Commission (CERC) has dismissed a petition filed by Avaada Energy Private Limited (AEPL), affirming the decision of the Central Transmission Utility of India Limited (CTUIL) to cancel in-principle connectivity granted for AEPL's 50 MW and 150 MW wind power projects. The bench, comprising Chairperson Shri Jishnu Barua and Members Shri Ramesh Babu V. and Shri Harish Dudani, ruled that AEPL failed to comply with the Grid Network Access (GNA) Regulations, 2022 by not furnishing the requisite Connectivity Bank Guarantee 2 (CONN-BG2) within the stipulated timeframe.

Case Background: Connectivity Cancellation Over Bank Guarantee Dispute

Avaada Energy had sought connectivity for its wind power projects at the Rajgarh Powergrid substation in Madhya Pradesh. CTUIL granted in-principle connectivity but identified the transmission system augmentation as Associated Transmission System (ATS), requiring AEPL to submit a substantial CONN-BG2. AEPL contested this, arguing that Rajgarh should be declared a Renewable Energy Zone (REZ), which would reclassify the augmentation as common network expansion, drastically reducing the required bank guarantee. When CTUIL demanded CONN-BG2 of ₹21.188 Crores for 50 MW and ₹27.564 Crores for 150 MW, AEPL only submitted a BG of ₹3 Crores, asserting it was the correct amount for common network expansion. CTUIL subsequently cancelled the in-principle connectivity due to non-compliance.

Petitioner's Arguments: REZ Declaration and Regulatory Flexibility

Represented by Senior Advocate Shri Gopal Jain, AEPL argued that: - The Rajgarh substation area, predominantly hosting renewable energy projects, should have been treated as a REZ from the outset. This would have categorized the necessary augmentations as common network expansions, significantly lowering the required CONN-BG2 to ₹3 Crores for a 220kV terminal bay. - CTUIL was aware of the imminent declaration of Rajgarh as a REZ and should have waited for the formal declaration before demanding the full CONN-BG2 under ATS. - The timeline for submitting CONN-BG2 is not rigid, and CTUIL's own conduct indicated flexibility, as evidenced by their extended deadlines. - Cancelling connectivity was discriminatory, especially as other similarly situated entities were allegedly treated more leniently.

AEPL contended that CTUIL's actions were "uninformed by reason impelled by mala-fides" and contradicted the spirit of promoting renewable energy.

Respondent's Submissions: Strict Adherence to GNA Regulations

CTUIL, represented by Advocate Shri Alok Shankar, countered that: - AEPL was explicitly informed that the connectivity was granted under ATS, necessitating the submission of CONN-BG2 as per GNA Regulations. - The GNA Regulations mandate the closure of connectivity applications if CONN-BG2 is not furnished within one month of intimation. CTUIL, as the nodal agency, was bound to follow these regulations. - While CTUIL acknowledged the subsequent REZ declaration and revised BG requirements for compliant entities, AEPL failed to submit the initially required CONN-BG2 within the extended timelines. - Other generators granted connectivity at Rajgarh under ATS had complied with the CONN-BG2 requirements.

CTUIL emphasized that "the GNA Regulations clearly state that in case applicable Conn-BG2 is not submitted within one month of the letter of intimation, the application for connectivity is closed."

CERC's Analysis and Decision: Upholding Regulatory Compliance

The Commission meticulously examined the GNA Regulations and the submissions from both parties. It highlighted Regulation 8.3(e), which stipulates that failure to furnish CONN-BG2 within one month of intimation leads to the closure of the connectivity application.

The CERC observed:

> “We observe that there is no provision in the GNA Regulations that allows any Connectivity Applicant to be relieved of submission of Conn-BG2 towards ATS on account of multiple RE projects at the same substation. The GNA Regulations strictly cast this responsibility of identification of augmentation and ATS out of such augmentation on CTUIL.”

The Commission found that CTUIL had correctly identified the augmentation as ATS and duly informed AEPL of the required CONN-BG2. AEPL's decision to unilaterally submit a reduced BG amount was deemed non-compliant with the regulations. The CERC rejected AEPL's argument for discriminatory treatment, noting that other generators under similar ATS conditions had fulfilled their CONN-BG2 obligations.

Expressing disapproval of AEPL's conduct, the CERC stated:

> “We express our displeasure at the conduct of the Petitioner for not furnishing the required Conn-BG2 despite being given additional time... Any delay in the submission of Conn-BGs and negotiating with CTUIL not to submit such required Conn-BGs would be detrimental to the smooth functioning of the system.”

Ultimately, the CERC upheld CTUIL's decision to cancel AEPL's in-principle connectivity, dismissing the petition and IA 82/2024. While acknowledging CTUIL's delay in formally revoking the connectivity, the Commission directed CTUIL to strictly adhere to regulatory timelines in the future to prevent similar disputes. The core principle established is the necessity for strict adherence to regulatory timelines and bank guarantee requirements for securing grid connectivity in the power sector.

The petition was accordingly disposed of.