CERC Allows Return of Connectivity Bank Guarantee for Abandoned Solar Projects

The Central Electricity Regulatory Commission (CERC) has allowed the Assam Power Distribution Company Ltd. (APDCL) to recover its Rs 214 crore Connectivity Bank Guarantee (Conn-BG2) submitted to the Central Transmission Utility of India Ltd. (CTUIL) after the cancellation of its proposed 750 MW inter-state transmission system (ISTS) connectivity for a solar project in Assam. However, the relief is subject to several conditions, including furnishing Rs 70 crore in cash or a bank guarantee to secure any future compensation payable to the transmission developer. The dispute arose after the Government of Assam shelved its proposed 1,000 MW solar project under the Mukhya Mantri Sauro Shakti Prokolpo, for which APDCL had been appointed the implementing agency. The project was initially planned with financial assistance from the Asian Development Bank (ADB), but the funding proposal was later withdrawn, prompting the state government to suspend the project and APDCL to surrender its 750 MW ISTS connectivity. Assam Discom Secures Connectivity APDCL had secured 750 MW connectivity at Bokajan after revising its original 1,000 MW connectivity application, and had furnished Conn-BG2 worth Rs 214 crore under the Connectivity and General Network Access (GNA) Regulations, 2022. The associated transmission system, North Eastern Region Generation Scheme-I (NERGS-I), had also been identified for evacuation of power. The utility argued that since the generation project itself had been abandoned because of the withdrawal of ADB funding, there was no justification for CTUIL to retain or encash the connectivity bank guarantee. It further submitted that no transmission system would now be built for the project and that it was willing to reimburse reasonable costs incurred by NERGS towards project development. CTUIL, however, contended that Regulation 24 of the GNA Regulations mandated encashment of Conn-BG2 where the associated transmission system had already been awarded for implementation. NERGS also opposed the release of the guarantee, arguing that it represented the only security available to cover compensation claims arising from cancellation of the transmission project. Reasonable Compensation Claims After examining the case, the Commission observed that although the associated transmission system had been awarded through the tariff-based competitive bidding route, the transmission licence proceedings remained pending and the project itself had effectively become unnecessary after APDCL withdrew its solar project. The Commission also noted that APDCL had undertaken to compensate NERGS for reasonable claims, meaning the underlying purpose of retaining the entire Rs 214 crore bank guarantee no longer existed. Invoking its Power to Relax and Power to Remove Difficulty under Regulations 41 and 42 of the GNA Regulations, CERC held that this was an exceptional case where strict application of Regulation 24 would result in hardship. The Commission said APDCL should not be subjected to encashment of a Rs 214 crore bank guarantee for a transmission project that would not be implemented because the corresponding generation project had been abandoned. Accordingly, CERC directed CTUIL to return the Conn-BG2 subject to APDCL fulfilling several conditions. These include filing a formal request for relinquishment of connectivity within 15 days, furnishing Rs 70 crore in cash or a bank guarantee within one month as security against any compensation payable to NERGS, and submitting an undertaking to honour any additional compensation that may be determined by the Commission. If APDCL deposits cash, CTUIL has been directed to keep the amount in a separate deposit account. The Commission also instructed CTUIL not to initiate coercive action against APDCL during the compliance period but allowed it to proceed under the GNA Regulations if the utility fails to comply with the conditions. The Commission clarified that it had not expressed any view on the validity of NERGS' compensation claim, which remains subject to separate adjudication. It noted that NERGS has claimed around Rs 69.36 crore towards reimbursement of project development expenses, and the Rs 70 crore security has been fixed only to safeguard those claims pending their final determination.