Regulatory Updates
CERC (Sharing of Inter State Transmission Charges and Losses) (Fourth Amendment) Regulations, 2025.
The Central Electricity Regulatory Commission (“CERC“) issued the Fourth Amendment to the Sharing of Inter-State Transmission Charges and Losses Regulations, 2020, which was notified on 26 June 2025, and published in the Official Gazette on 2 July 2025. This amendment introduces several significant changes such as:
- Apportionment of Charges: Clarifies how transmission charges are apportioned for drawee Distribution Interconnection Companies (“DICs“) (other than state distribution licensees) that have obtained a separate General Network Access (“GNA“) and are not included in the state’s overall GNA. Their share of transmission charges will now be apportioned from the aggregate AC-UBC (Area of Control – Unscheduled Bilateral Contracts) charges for the State in proportion to their GNA.
- Transmission Deviation Computation: Generating stations with dual connectivity to both inter-state and intra-state transmission systems will have their transmission deviation calculated as net metered ex-bus injection exceeding the sum of their GNA to the inter-state system and their Access with State Transmission Utility (“STU“) system. Further, STUs are now mandated to share these Access with STU details with the National Load Despatch Centre (“NLDC“) and Central Transmission Utility (“CTU“).
- Expanded Waiver Eligibility: Offshore wind-based Renewable Energy Generating Stations are now included in the eligibility criteria for transmission charge waivers.
- Time Extensions: Provisions introduced for extending the time to achieve Commercial Operation Date for eligible renewable projects due to force majeure events.
Natural Gas Pipeline Tariff Regulations, 2025 amended
On 4 July 2025, the Petroleum and Natural Gas Regulatory Board (“PNGRB“) approved the Second Amendment to the Natural Gas Pipeline Tariff Regulations, 2025. The key amendments include:
- Streamlined Tariff Structure: Reduction of Unified Tariff Zones from three to two, creating a more equitable tariff structure and improving access to natural gas, particularly in underserved regions.
- CNG and PNG (Domestic) Benefits: Extension of Zone 1 Unified Zonal Tariff benefits nationwide for Compressed Natural Gas and Piped Natural Gas (Domestic) segments, making natural gas more affordable for urban households and transport networks.
- System-use Gas Procurement: Requirement for pipeline operators to procure at least 75% of their annual system-use gas through long-term contracts (minimum three-year tenure), aiming to stabilize tariffs, reduce risks, and lower costs.
- Pipeline Development Reserve: Introduction of a dedicated reserve funded by earnings from pipeline entities exceeding 75% utilization benchmarks. 50% of these net-of-tax earnings will be reinvested in infrastructure development, and balance will benefit consumers through tariff adjustments.
CERC Directions for Implementing Market Coupling
CERC, through its order dated 23 July 2025, has outlined directions for implementing Market Coupling under the CERC (Power Market) Regulations, 2021. This follows the earlier order of 6 February 2024, which launched a shadow pilot project to test coupling of key market segments—Day Ahead Market (“DAM“), Real Time Market (“RTM“), and RTM with Security Constrained Economic Dispatch (“SCED“)—across India’s three power exchanges.
Grid-India was tasked with developing the required coupling software and executing the pilot. Based on Grid-India’s report which was submitted on June 30, 2025, and as per Regulations 37-39 of the 2021 regulations, CERC decided to implement market coupling in phases:
- DAM coupling to commence by January 2026, with power exchanges operating as Market Coupling Operators (MCOs) on a rotational round-robin basis, and Grid-India serving as a backup and audit MCO.
- RTM coupling to be considered later after sufficient experience with DAM coupling.
- RTM-SCED coupling to undergo further regulatory and stakeholder review.
- Term-Ahead Market coupling to be tested through a new shadow pilot.
CERC (Connectivity and General Network Access to the inter-State Transmission System) (Third Amendment) Regulations, 2025
The CERC has issued the third amendment to the CERC (Connectivity and General Network Access to the inter-State Transmission System) Regulations, 2022 (“Third Amendment“), which came into effect from 31 August 2025. The key changes bought by the Third Amendment inter alia include:
- Introduction of “Cluster of Inter-State transmission system (“ISTS“) substations” – ISTS substations grouped together based on geographical proximity, technical feasibility and other criteria.
- Solar hour access: Renewable energy generating stations (“REGS“) based on wind or ESS to apply for connectivity under the newly introduced categories of “solar hour access” and “non-solar hour access.” Accordingly, a wind-based REGS (with or without storage) or an ESS may obtain connectivity with non-solar hour access for a capacity of 50 MW or more at the terminal bay of an ISTS substation, either through a separate dedicated transmission line, or at a terminal bay already allotted to another REGS or renewable power park having solar hour access.
- Change in control: Introduction of the restriction on any change in control of the connectivity grantee, until project commissioning, from the date of filing for the connectivity application. Any deviation requires prior approval from the nodal agency. Failure to comply with these requirements will result in revocation of the granted connectivity and encashment of the bank guarantees submitted by the grantee.
- Change in Source: Any change in source of the connectivity grantee before commissioning must receive prior approval from the nodal agency.
- Relinquishment of Connectivity: If relinquishment happens within six months of signing the connectivity agreement, 40% of the existing bank guarantee for the relinquished portion is to be encashed. If it occurs after six months but before the deadline for document submission, 75% is to be encashed.
- Flexibility to Replace Land Parcels – Applicants can now replace previously submitted land parcels, either fully or partially. However, the evidence of land area must still meet at least 50% of the required project land.
MNRE issues clarification on ALMM List-II mandate for government projects
The Ministry of New and Renewable Energy (“MNRE“) has issued a clarification addressing the applicability of the Approved List of Models and Manufacturers (“ALMM“) List-II (solar cells) to government solar projects across net metering, behind-the-meter, and open access modes.
Government solar projects under net metering, behind-the-meter, and open access are exempt from using ALMM List-II (cells) if their last bid submission date is on or before 31 August 2025. They must still use ALMM List-I compliant modules. No exemption is provided where a government program mandates Domestic Content Requirement for both cells and modules. Such projects must comply fully with ALMM (cells and modules) according to the program terms.
MNRE issues Guidelines for Green Energy Hydrogen Use in Residential Sector
The Ministry of New and Renewable Energy, vide notification dated 4 August 2025, has issued program guidelines for the implementation of green hydrogen pilot projects in residential, commercial and decentralized centers. These guidelines focus on deploying green hydrogen in off-grid, localized, community-based applications and decentralized production models using rooftop solar, biomass etc., which will be key features of the pilot projects. The projects will be implemented by the scheme implementing agencies (“SIAs”) designated for specific sectors under this initiative and this program is part of the larger National Green Hydrogen Mission (“NGHM”).
Some key features of the notification are as follows:
- Implementation methodology and approval: All projects will be implemented by the SIAs designated for specific sectors under this initiative. The SIA will identify the project suitable for new development considering factors such as innovation or financial support and will then issue call for proposals for the projects. The proposals will be evaluated first by the screening committee within the SIA, followed by a project appraisal committee in accordance with the criteria specified in the call for proposals. The final approval will be given by the advisory group of NGHM. The letter of award shall be issued to the executing agents by the SIA upon receipt of administrative sanction from the Ministry.
- Financial Support: The funds for the projects are divided into three tranches where the first 20% of Central Financial Assistance shall be released upon issuance of a letter of award, 70% based on milestones and 10% after project completion.
- Monitoring Framework: The overall monitoring and implementation of the scheme and projects will be done by a Steering Committee, which can suggest modifications and course corrections. In case of ambiguity while dealing with this scheme, the decision of the Ministry will be final.
Exemption to off-stream pumped storage projects from CEA concurrence
The Ministry of Power has, on 1 August 2025, notified the requirement of concurrence by the Central Electricity Authority (“CEA”) for schemes for setting up of hydro generating stations, involving a capital expenditure of more than INR 30 billion.
However, off-stream closed-loop pumped storage schemes, irrespective of the quantum of capital expenditure, will be exempted from the requirement of concurrence by the Authority. Such exempted schemes may seek technical guidance from the CEA.
Electricity Rules amended for energy storage systems
The Ministry of Power has, vide a notification dated 19 September 2025, amended Rule 18 of the Electricity (Amendment) Rules, 2025, in connection with energy storage system (“ESS“).
Brief of the key amendments is below:
- Independent system: An ESS shall be utilized either as an independent energy storage system or as part of generation, transmission and distribution.
- Consumers can develop ESS: Apart from a generating company, transmission licensee, distribution licensee, system operator or an independent service provider, a consumer can now develop, own, lease and operate an ESS. Thus, the ESS owned and operated by and co-located with a consumer have the same legal status as that of the owner.
- Storage capacity to consumers: A developer or owner of the ESS can now sell or lease or rent out the storage capacity in whole or in part to any consumer, in addition to the existing list of persons/entities permitted.
Case Summaries
Supreme Court holds that statutory rights cannot be foreclosed by contract, where public interest involved
In a dispute arising between the Gujarat Urja Vikas Nigam Limited (“GUVNL“) and Gujarat based wind energy producers, the Hon’ble Supreme Court in Civil Appeal Nos. 14098-14101 of 2015 delved into the question of whether producers could approach the Gujarat Electricity Regulatory Commission (“GERC“) for project specific tariff determination.
The power producers in the present proceedings had entered into Power Purchase Agreements (“PPAs“) with GUVNL wherein a levelized tariff of Rs.3.56/kWh was set out as per GERC Order No. 1 of 2010. However, the levelized tariff was to only apply to wind projects that had availed the benefit of accelerated depreciation (“AD“).
The dispute arose when the power producers sought project specific tariff determination, having not availed AD. This was opposed by GUVNL on the grounds that the producers had entered into PPAs containing a flat rate of Rs. 3.56/kWh and foreclosed themselves from revising the said rate.
The Hon’ble Supreme Court held that the levelized rate was limited to projects that had availed AD. In the absence of any written confirmation by the producers, the statutory right for project specific determination could not be foreclosed by way of contractual terms without due consideration being given to public interest, thereby affirming the right of the producers to approach GERC for tariff determination when they had not claimed AD benefits. The hon’ble Supreme Court further held that the timing for exercising the option to claim AD arises only when filing returns for the relevant assessment year i.e., after project commissioning. Thus, binding a power producer to a tariff under the PPA before this statutory choice was untenable.
The judgment clarified that statutory tariffs fixed by regulatory commissions override contractual tariffs unless specifically tied to statutory choices made by the parties at the relevant time.
Stay on MSEDCL’s restrictions on usage of banked renewable energy during solar hours
The Hon’ble Bombay High Court has issued a significant interim order dated 1st July 2025 in Writ Petition (L) Nos. 19450, 19437, 19529 and 19640 of 2025 (“Petitions“), staying the Maharashtra Electricity Regulatory Commission’s (“MERC“) mandate that restricted usage of banked renewable energy to only solar hours for Maharashtra State Electricity Distribution Company Limited (“MSEDCL“) consumers. The Hon’ble Court reinstated the older multi-year tariff (“MYT”) framework, allowing banked renewable energy to be used at any time except during peak hours.
The petitioners contended that the new banking restrictions issued by MERC vide its order dated 25th June 2025 (“Impugned MERC Order“), which had limited the use of banked renewable energy to the same time slot and solar hours, undermined the viability and financial savings from solar projects under MSEDCL and is detrimental to solar investments.
Notably, these banking limitations only applied to MSEDCL consumers, sparing consumers under Tata Power and Adani Electricity’s distribution companies.
Vide its order dated 26th August 2025 passed in Interim Application (L) No. 26676 of 2025, the Hon’ble High Court clarified that staying the Impugned MERC Order effectively reverts to the regulatory environment as it stood under the previous MYT order.
The final outcome of the writ petitions will decide the long-term status of banked renewable energy usage in Maharashtra.
For more information contact:
Jhinook Roy
Partner & Practice Head – Projects & Infrastructure
jhinook.roy@veritaslegal.in
DISCLAIMER
VERSED by Veritas Legal intends to provide the readers with an overview of some of the noteworthy legal developments for education / information purposes only. This newsletter should not be construed or relied on as legal advice, or to create a lawyer-client relationship. Readers should reach out to us for any specific factual or legal questions or clarifications; and are encouraged to seek legal advice before acting on any information provided herein. The enclosed information is available in the public domain and shall not be construed as dissemination of any confidential information.