Background

The Central Electricity Regulatory Commission (CERC) has issued a landmark Order dated 14 August 2026 in Petition No. 5/SM/2026, prescribing a uniform procedure for levying compensation charges against entities that seek additional time to achieve milestones under the CERC (Connectivity and General Network Access to the inter-State Transmission System) Regulations, 2022 (GNA Regulations).

Under the GNA Regulations, connectivity grantees, i.e., renewable energy generators (REGS), energy storage systems (ESS), and renewable power park developers must meet three milestones within prescribed timelines: (i) submission of land documents for 50% of required land (Regulation 11A(1)), (ii) achievement of Financial Closure (Regulation 11A(2)), and (iii) achievement of Commercial Operation Date (COD) (Regulation 24.6). Failure to meet any milestone triggers revocation of connectivity and encashment of bank guarantees.

Several entities were either served revocation notices or anticipated them. Many approached CERC seeking extensions on a case-by-case basis. To handle these requests uniformly, CERC proposed a draft procedure on 15 April 2026, received comments from 42 stakeholders, conducted a public hearing on 19 May 2026, and has now finalised the framework. The Order has been issued under CERC’s power to relax (Regulation 41) read with its power to issue suo motu directions (Regulation 44) of the GNA Regulations, transitioning the framework from a case-specific hardship relief mechanism to a general suo motu practice direction.

An Optional and Facilitative Compensation Mechanism

The Framework is an optional, facilitative compensation mechanism. An entity that fails to meet a milestone can either accept revocation under the existing GNA Regulations or opt for additional time by paying Milestone Extension Charges (MEC). The choice lies entirely with the entity.

CERC has clarified three points. First, opting for an extension does not modify, dilute, or override any Power Purchase Agreement (PPA) terms, including liquidated damages. Second, MEC is not a ‘change in law’ event and is not eligible for tariff adjustment or pass-through. Third, the firm start date of connectivity remains unchanged, and entities remain liable for mismatch charges under the CERC (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2020.

CERC rejected demands from developers that MEC be waived for delays not attributable to them such as for force majeure, transmission-side delays, or delays in PPA signing. The rationale provided by CERC is that connectivity is a scarce resource, i.e., one entity holding it blocks other entities. MEC is therefore payable irrespective of the reason for delay.

Who Qualifies for an Extension?

A missed deadline does not, by itself, create an entitlement to an extension. Each milestone has minimum eligibility thresholds. The entity must demonstrate tangible project progress. Documents satisfying eligibility must be submitted to Central Transmission Utility of India Limited (CTUIL) at least 15 working days before the milestone deadline.

For Land Document Extension (Reg. 11A(1))

• Land documents for at least 20% of the total land required must be furnished.
• Documents must be submitted at least 15 working days before the last date of compliance.

For Financial Closure Extension (Reg. 11A(2))

• Land documents for at least 20% of the total land required must be furnished (uniform for all routes).
• Documents must be submitted at least 15 working days before the last date of compliance.

For COD Extension (Reg. 24.6)

• Land/Land Bank Guarantee (BG) route: land documents for 75% of the total land required.
• LOA/PPA route: land documents for 50% of the total land required.
• Contracts for supply of major/key equipment and civil/electrical works (separately or under EPC contracts) must be furnished.
• All documents must be submitted at least 15 working days before the last date of compliance.

CTUIL scrutinises the documents within 7 working days, followed by a 7-working-day window for the entity to rectify any identified deficiencies. The entity must furnish the MEC within 3 working days of CTUIL’s intimation, failing which the application will be closed. Once CTUIL confirms that the eligibility requirements have been met, it will intimate the applicable MEC for the period that has already elapsed beyond the relevant compliance date and for the next 15 days in advance. The entity is required to furnish the MEC within 3 working days of such intimation, failing which the application seeking additional time is closed and the connectivity is treated in accordance with the GNA Regulations.

CERC rejected the suggestion to remove land eligibility thresholds entirely. It observed that if an entity has acquired no land at all, it raises a serious question about its commitment to the project. The thresholds were, however, moderated from the draft — the COD eligibility was reduced from 100% to 75% for the Land/Land BG route, in response to stakeholder requests.

Milestone Extension Charges: Rates and Slabs

MEC is payable per MW per day, in advance, for 15 days at a time. Entities may choose to pay for a longer estimated period. If the milestone is achieved within the extended period, the unutilised MEC is refunded without interest within 15 days. Separate MEC is payable for each milestone if extensions are sought for more than one.

1.Land Document Extension

• Base rate: INR 1,000/MW/day for Month 1.
• Month 2: INR 1,100/MW/day (10% escalation). Month 3: INR 1,200/MW/day (20% escalation).
• Maximum extension: 3 months. Failure beyond this triggers revocation and BG encashment.

2.Financial Closure (FC) Extension

• Base rate: INR 1,000/MW/day, held flat for the first 3 months.
• 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. Failure beyond this triggers revocation and BG encashment.

3.COD Extension

• Base rate: INR 3,000/MW/day, held flat for Months 1–6.
• Months 7–9: 10% escalation per month — INR 3,300, INR 3,600, INR 3,900/MW/day respectively.
• Months 10–12: 200% of base rate — INR 6,000/MW/day.
• Maximum extension: 12 months. Failure beyond this triggers proportionate revocation.

Therefore, failure to achieve the milestone beyond the maximum extension period (such as 3 months for Land or 6 months for FC) triggers immediate revocation of connectivity and bank guarantee encashment.

Conditional MEC-Free Period Following GNA Effectiveness

Under the GNA Regulations, Regulation 24.6 sets out triggers for revocation of connectivity i.e., A developer’s Connectivity can be revoked if it fails to achieve COD within 6 months of the scheduled commercial operation date (under the Letter of Award route).

Where this revocation trigger falls within 2 months of the GNA effective date, the developer gets at least 2 months beyond the GNA effectiveness date to achieve COD. No MEC is payable for this grace period. The total extended time (including the MEC-free period) remains capped at 12 months.

CERC rejected demands to extend this window to 3–6 months. The Commission noted inter alia that standard PPAs permit 30–60 days from GNA effectiveness and therefore opined that two months is adequate.

Refunds and Utilisation of MEC Proceeds

50% refund on timely COD: If an entity achieves COD for the full or part quantum of connectivity under Regulation 24.6, including any applicable extension of up to two months, it will not require a paid COD extension under this Order. In such case, 50% of the MEC paid towards land and financial closure extensions will be refunded without interest. The refund will be made within one month from the date of CODdeclaration of COD. COD

Cross-milestone adjustment: Entities achieving a milestone early may request CTUIL to retain and adjust prepaid MEC balances against other milestones within the same connectivity grant. Any remaining 50% of land/FC MEC, if unclaimed or ineligible for refund, is held by CTUIL to reduce monthly transmission charges.

Utilisation of proceeds: 100% of MEC collected for COD extensions, and 50% of MEC collected for land and FC extensions (where the entity does not qualify for refund), is used to reduce monthly transmission charges under the Sharing Regulations, 2020. The remaining 50% of land/FC MEC is held by CTUIL in a separate account — either for refund to eligible entities or, if unclaimed, for transmission charge reduction. Accrued interest on this account also flows into transmission charge reduction.

What CERC Rejected

The Order is as notable for what it declined to accept as for what it prescribes. Several developer demands were turned down:

• No waiver of MEC for force majeure, transmission-side delays, or PPA-related delays. MEC is payable irrespective of the reason for delay.
• No dynamic linking of MEC to actual BG amounts, Inter State Transmission Services (ISTS) transmission charges, or project size. CERC has retained uniform base rates, subject to the prescribed monthly escalation structure.
• No MEC calculated only on outstanding/residual land capacity. For COD extension, MEC is payable on the capacity that has not achieved COD.
• No bank guarantee in lieu of cash payment of MEC. Advance cash payment is mandatory.
• No post-facto billing. MEC must be paid 15 days in advance.
• No interest on MEC refunds. Refunds are made without interest within 15 days of compliance.
• No separate framework for captive industrial consumers (e.g., steel plants). The framework applies uniformly.
• No extension of the 12-month COD cap to 15–18 or even 30 months, as some developers sought.

On the other side, DISCOMs and their associations demanded higher MEC rates (INR 4,000–5,000/MW/day for COD), steeper escalations, shorter timelines, and prior DISCOM consent before seeking extensions where ISTS waivers are involved. CERC rejected these as well. The consent of the DISCOM is not required for seeking an extension, as connectivity and milestones are governed by the GNA Regulations, not the PPA.

Key Takeaways for Developers The procedure is optional. If you do not opt in, your connectivity is governed under the existing GNA Regulations as before. Eligibility is based on demonstrated project progress. MEC is payable per MW per day, in advance, for 15-day blocks. Rates escalate monthly. Maximum extensions: 3 months for land, 6 months for FC, 12 months for COD including the conditional MEC-free period described above. 50% of land/FC MEC is refundable if COD is achieved within the applicable timeline and without requiring a paid COD extension. MEC is not a change in law event. No tariff pass-through. PPA terms, including liquidated damages, are not affected. The firm start date of connectivity does not change. Mismatch charges under the Sharing Regulations, 2020 continue to apply.

Practical Considerations

Entities considering an extension should identify the applicable milestone deadline, confirm that the relevant land-document and project-progress thresholds have been met, and submit the necessary documents to CTUIL at least 15 working days in advance. They should also be prepared for CTUIL’s scrutiny and deficiency-cure process, and should factor the advance MEC payment requirement, as well as continuing mismatch-charge exposure, into project cash-flow planning.

Our View

This Order brings much-needed uniformity to a process that was until now ad hoc and case-by-case. For developers who have made genuine progress but need a limited runway, it offers a predictable, if expensive, path to retain connectivity. The escalating MEC structure ensures that the cost of delay increases over time, pushing developers towards earliest compliance.

However, the refusal to distinguish between developer-attributable and external delays is a hard pill for the industry. A developer delayed by transmission-side readiness or by late PPA execution pays the same MEC as one delayed by its own execution failures. CERC’s reasoning — that connectivity is a scarce resource and squatting must be deterred — is sound at a sectoral level, but it leaves limited flexibility for genuine cases involving external delays. Entity may approach the Commission under applicable laws for case-specific relief, but that is a separate, slower, and less certain path.

The practical impact will depend on how CTUIL administers the eligibility scrutiny and MEC collection. A 7-working-day scrutiny window with a 7-day cure period is tight, and entities will need to prepare their documentation well in advance. The advance payment requirement also means entities must factor MEC into their project cash flows from the outset.

Authors: Akshay Malhotra – Partner and Aishik Majumder – Senior Associate

Disclaimer: This alert only highlights key issues and is not intended to be comprehensive. The contents of this publication do not constitute any opinion or determination on, or certification in respect of, the application of Indian law by Talwar Thakore & Associates (“TT&A”). No part of this publication should be considered an advertisement or solicitation of TT&A’s professional services.