UERC Rejects UPCL Plea on BESS Benchmark Charges; Clarifies Exemption for VGF Projects

The Uttarakhand Electricity Regulatory Commission (UERC) has dismissed a petition filed by the Uttarakhand Power Corporation Limited (UPCL) seeking to apply an erstwhile benchmark capacity charge of ₹3,96,747/MW/month to its 100 MW/250 MWh standalone Battery Energy Storage System (BESS) tender. The commission ruled that the utility must instead adhere to the tariff adoption process under Section 63 of the Electricity Act, 2003, for projects discovered through competitive bidding. The bench, consisting of Chairman M.L. Prasad, Member (Law) Anurag Sharma, and Member (Technical) Prabhat Kishor Dimri, clarified that the June 4 revised generic benchmark of ₹2,59,244/MW/month does not automatically apply to projects supported by the Central Government’s Viability Gap Funding (VGF) scheme.

Chronology of the BESS Tendering and Benchmark Revision

The dispute follows a sequence of regulatory actions and procurement milestones occurring in the first half of 2026:

• Jan. 6, 2026: UERC issued an order setting the benchmark capacity charge for standalone BESS at ₹3,96,747/MW/month.
• Feb. 2026: UPCL launched a competitive bidding process for 100 MW/250 MWh of standalone BESS capacity across three geographic clusters.
• June 1, 2026: UPCL issued Letters of Award (LoAs) to successful bidders based on the January benchmark parameters.
• June 4, 2026: The commission issued a subsequent order revising the benchmark capacity charge to ₹2,59,244/MW/month for the 2026-27 financial year, citing changes in capital costs.

UPCL’s Petition and Legal Arguments

UPCL sought relief to execute power purchase agreements at the January rate based on the following procedural and legal grounds:

• Section 86(1)(b) of the Electricity Act, 2003: Invoked to request approval for the procurement process and the execution of agreements at the previous rate.
• Regulation 53 of the RE Regulations, 2023: Utilized to request the “Power to Remove Difficulties,” with the utility arguing that the June 4 revision disrupted the ongoing tender.
• Regulation 59 of the Conduct of Business Regulations, 2014: Invoked regarding the commission’s “Inherent Powers” to address the specific timing of the procurement.
• VGF Integrity: The utility argued that the lower rate could disrupt commercial expectations and jeopardize the receipt of Central Government Viability Gap Funding.

UERC’s Findings and Rationale for Rejection

The commission dismissed the plea, stating that regulatory and inherent powers cannot be used to circumvent statutory frameworks or finalized orders:

• Regulation 53/59 Applicability: The commission held that the “power to remove difficulties” is intended for interpreting regulations, not for altering statutory provisions. It further noted that inherent powers cannot be used to remedy issues arising from a party’s own procedural conduct.
• Disclosure Issues: The bench observed that UPCL participated in the benchmark cost review proceedings in May 2026 but failed to disclose that its tender had reached the stage of issuing LoAs. The commission ruled that UPCL could not seek equitable relief for a situation exacerbated by a lack of disclosure.
• Review Standards: Evaluating the filing against the standards of a review petition under Section 94(1)(f) of the Electricity Act, 2003, and Order XLVII Rule 1 of the Code of Civil Procedure, 1908, the commission held that market fluctuations or results from other states do not constitute “new evidence” or a “mistake or error apparent on the face of the record.”

UPCL Standalone BESS Tender Structure

The procurement is organized into three clusters covering the utility’s regional circles:

Clarification on VGF-Backed Projects and Section 63 Adoption

The commission provided clarification regarding projects supported by the Ministry of Power’s VGF scheme. It ruled that the generic benchmark of ₹2,59,244/MW/month is a ceiling for standard projects and is not a mandatory rate for VGF initiatives.

The commission noted that storage projects vary according to location, duration, and operational requirements, making a generic levelized cost inappropriate for site-specific VGF infrastructure. Consequently, the commission directed UPCL to conclude the competitive bidding process and approach the commission for tariff adoption under Section 63 of the Electricity Act, 2003. This allows the commission to adopt the specific rate discovered through a transparent, competitive process.

Regulatory Constraints and Local Content Rules

BESS projects implemented under the VGF scheme must adhere to “Make in India” rules as specified by the Ministry of Power:

• Local Content Requirement: A minimum of 20 percent of the total project cost must consist of local content.
• EMS software Mandate: Per the August 2025 amendment to the VGF Guidelines, the Energy Management System (EMS) application software must be indigenously developed. This software must be included in the 20 percent local content calculation.
• Supplier Eligibility: Both Class-I and Class-II local suppliers remain eligible to participate.
• Transitional Compliance: For tenders issued without these explicit terms, bidders must provide a formal undertaking committing to meet the 20 percent local content requirement during project execution.