CERC Introduces Graded Paid Mechanism for Extension of Grid Connectivity Milestones

Standardized Compensation Framework for Grid Connectivity

The Central Electricity Regulatory Commission (CERC) has finalized a standardized, compensation-based mechanism allowing renewable energy developers and other connectivity grantees additional time to meet critical project milestones. Effective August 14, 2026, this landmark order transitions the implementation of the Connectivity and General Network Access (GNA) Regulations, 2022, from a case-specific hardship relief model to a uniform practice direction.

The new framework replaces the previous practice of automatic connectivity revocation with an “optional facilitative mechanism.” Under this system, developers may pay Milestone Extension Charges (MEC) to retain their grid access. The Commission has defined transmission capacity as a “scarce resource,” emphasizing that this mechanism balances project flexibility with the need to prevent non-performing entities from indefinitely blocking corridor capacity.

Background and Regulatory Context

Prior to this order, the GNA framework mandated that failure to meet milestones—specifically land acquisition (Regulation 11A(1)), Financial Closure (Regulation 11A(2)), or the Commercial Operation Date (COD) (Regulation 24.6)—triggered the automatic revocation of connectivity and the encashment of associated bank guarantees.

CERC’s intervention was prompted by data from the Central Transmission Utility of India Limited (CTUIL) showing that approximately 5.3 GW of renewable capacity was at risk of revocation by October 2026. Invoking its “power to relax” (Regulation 41) and “suo motu directions” (Regulation 44), the Commission established this procedure to handle the volume of extension requests uniformly while ensuring that developers demonstrate tangible project progress.

Eligibility Thresholds for Extension Requests

Extension of milestones is not an entitlement; grantees must meet minimum eligibility thresholds to apply. All documentation must be submitted to CTUIL at least 15 working days before the original compliance deadline.

Standardized & Graded Milestone Extension Charges (MEC)

MEC is calculated on a per MW per day basis and is payable in advance for 15-day blocks. The framework includes a conditional MEC-free grace period: if a revocation trigger falls within two months of the GNA effective date, the developer receives a two-month extension without charge, though the total extension remains capped at 12 months.

1. Land & Financial Closure (FC) Charges

• Base Rate: INR 1,000/MW/day.
• Land Timeline:
  • Month 1: INR 1,000/MW/day.
  • Month 2: INR 1,100/MW/day (10% escalation).
  • Month 3: INR 1,200/MW/day (20% escalation).
  • Maximum Extension: 3 months.
• FC Timeline:
  • Months 1–3: INR 1,000/MW/day (Flat).
  • Month 4: INR 1,100/MW/day.
  • Month 5: INR 1,200/MW/day.
  • Month 6: INR 1,300/MW/day.
  • Maximum Extension: 6 months.

2. Commercial Operation Date (COD) Charges

• Base Rate: INR 3,000/MW/day.
• Timeline:
  • Months 1–6: INR 3,000/MW/day.
  • Months 7–9: 10% monthly increases (reaching INR 3,900 by Month 9).
  • Months 10–12: INR 6,000/MW/day (200% of base rate).
• Maximum Extension: 12 months.

Procedural Rules and Operational Mechanics

CTUIL is tasked with the administration and scrutiny of all extension applications:

• Scrutiny and Rectification: CTUIL will scrutinize submissions within 7 working days. If deficiencies are found, developers have a 7-working-day window to rectify them.
• The 3-Day Payment Rule: Once CTUIL intimates the applicable MEC, the developer must furnish the payment within 3 working days. Failure to meet this deadline results in the immediate closure of the application.
• Payment Terms: MEC must be paid 15 days in advance via cash. Bank guarantees are not accepted in lieu of cash for MEC payments.
• Non-compliance: Failure to meet eligibility thresholds, miss payment deadlines, or complete milestones within the maximum allowed period will result in connectivity being handled under the original GNA revocation and bank guarantee encashment provisions.

Financial Treatment: Refunds and Utilization of Proceeds

• 50% Refund Rule: If a project achieves COD within its original timeline or within the two-month grace period without requiring a paid COD extension, 50% of the MEC paid for Land and FC extensions is refundable. All refunds are issued strictly without interest within 15 days of compliance or one month of COD.
• Cross-Milestone Adjustment: Grantees achieving a milestone early may request that CTUIL retain and adjust unutilized prepaid MEC balances against other milestones within the same connectivity grant.
• Utilization of Funds: 100% of COD extension fees and 50% of Land/FC fees (where non-refundable) are utilized to reduce monthly transmission charges for all Inter-State Transmission System (ISTS) users under the Sharing Regulations, 2020.

Key Regulatory Clarifications and Exclusions

CERC has established rigid boundaries to prevent the MEC mechanism from becoming a loophole for project non-performance:

• Unconditional Payment: MEC is payable irrespective of the reason for delay, including Force Majeure, transmission-side readiness, or delays in PPA execution.
• Mismatch Charges: The “Firm Start Date” of connectivity remains unchanged. Paying MEC does not stop the clock on mismatch charges under the Sharing Regulations; developers remain liable for these charges if the project is not ready by the original start date.
• PPA and Tariffs: Extensions do not override PPA terms or liquidated damages. Furthermore, MEC is not a “Change in Law” event and is not eligible for tariff pass-through.
• Calculated Capacity: For COD extensions, MEC is payable only on the specific capacity that has not yet achieved commercial operation.

Official Regulatory Sources & Citations

• Central Electricity Regulatory Commission (CERC)
  • Official Portal: Central Electricity Regulatory Commission (CERC) India
  • Governing Parent Statute: Section 79 & Section 61 of the Electricity Act, 2003
  • Core Regulatory Order: Suo Motu Order dated 14 August 2026 in Petition No. 5/SM/2026 (Uniform Procedure for Milestone Extension Charges)
  • Primary Governing Regulation: CERC (Connectivity and General Network Access to the inter-State Transmission System) Regulations, 2022 (GNA Regulations)
  • Associated Transmission Regulation: CERC (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2020
• Central Transmission Utility of India Limited (CTUIL)
  • Role & Authority: Nodal agency carved out under Section 38 of the Electricity Act, 2003, responsible for planning the inter-State transmission system, processing connectivity applications, and administering/collecting Milestone Extension Charges (MEC).
• Ministry of New and Renewable Energy (MNRE)
  • Role & Authority: The dedicated union ministry responsible for framing overarching policy for India’s clean energy sector.