JSA Prism | Electricity and Power | August 2026

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Central Electricity Regulatory Commission notifies standardised procedure for levying Milestone Extension Charges for permitting additional time to achieve milestones under the General Network Access regulations

The Central Electricity Regulatory Commission (“CERC”), vide order dated August 14, 2026, in Petition No. 5/SM/2026 (“Order”), has notified a standardised Procedure for Levying Milestone Extension Charges (“MEC”) (set out in Annexure-I to the Order) (“Procedure”) for permitting additional time to achieve milestones under the CERC (Connectivity and General Network Access to the inter-State Transmission System) Regulations, 2022, as amended (“GNA Regulations”).

Regulations 11A, 11B and 24.6 of the GNA Regulations prescribe strict timelines for connectivity grantees (renewable energy generating stations other than hydro, energy storage systems excluding pumped storage projects, and renewable power park developers) to achieve 3 (three) key milestones:

1. submission of land documents (for at least 50% of required land);
2. achievement of Financial Closure (“FC”); and
3. achievement of Commercial Operation Date (“COD”).

Any non-compliance with the prescribed timelines may result in revocation of connectivity (in full or in part) and treatment/encashment of the Connectivity Bank Guarantees (“Conn-BGs”) and Land-related Bank Guarantees (“Land-BGs”) under the GNA Regulations.

Given the large volume of petitions seeking additional time to achieve these milestones, CERC has relaxed the relevant provisions of the GNA Regulations under Regulation 41 (power to relax) and issued this suo motu Order under Regulation 44 (power to issue suo motu orders) of the GNA Regulations. The Order introduces a uniform and transparent compensation mechanism for all eligible connectivity grantees, in place of case-by-case requests for relaxation. The MEC mechanism is facilitative and optional and does not take away an entity’s right to approach the CERC under the Electricity Act, 2003 and the regulations made under it. The Order is effective from August 14, 2026.

Salient features

Eligibility condition

1. An entity seeking additional time must satisfy the following eligibility conditions at least 15 (fifteen) working days before the original deadline for the relevant milestone:
   • Extension for submission of Land Documents (against Regulation 11A(1)): The entity must have already furnished land documents for at least 20% of the total land required for the connectivity capacity.
   • Extension for achievement of Financial Closure (against Regulation 11A(2)): The entity (whether on the Land-BG route or the Letter of Award (“LoA”)/Power Purchase Agreement (“PPA”) route) must have furnished land documents for at least 20% of the total land required.
   • Extension for achievement of COD (against Regulation 24.6):
     • Land/Land-BG route: land documents for at least 75% of land required; and
     • LoA/PPA route: land documents for at least 50% of land required.

In each case, the entity must furnish details of contracts executed for supply of major/key equipment and for civil/electrical works (whether separately or under an engineering, procurement and construction arrangement).

2. Scrutiny and processing by Central Transmission Utility of India Limited (“CTUIL”) (as nodal agency): CTUIL must flag deficiencies within 7 (seven) working days of receiving the application. The entity then has 7 (seven) working days to rectify them. If the entity does not rectify the deficiencies within that period, it loses eligibility to seek additional time for the relevant milestone and CTUIL will process the case under the GNA Regulations. CTUIL must then confirm eligibility and intimate the applicable MEC within 7 (seven) working days of deficiency removal. The entity must pay the MEC within 3 (three) working days of that intimation, failing which CTUIL will close the application and process the case under the GNA Regulations.

Maximum permissible extension and MEC rate structure

The MEC for COD is payable only on the capacity (in MegaWatt (“MW”)) that has not achieved COD, multiplied by the number of days of delay. The MEC for land document and FC compliance is levied on the total connectivity capacity, not merely the outstanding/residual quantum of land arrangement.

The MEC is payable at the following rates (where ‘month’ means 30 (thirty) days):

Payment and refund mechanics

1. MEC is payable separately for each milestone, in cash, at least 15 (fifteen) days in advance (or more, at the entity’s option). Bank guarantees are not accepted in lieu of cash payment. Failure to pay MEC within the prescribed advance timeline results in revocation of connectivity and treatment of BGs in accordance with the GNA Regulations.
2. If the entity achieves the relevant milestone within the extended period for which MEC has been paid in advance, the MEC equivalent to the remaining days is refunded without interest within 15 (fifteen) days of such compliance.
3. Unutilised MEC may, on written request by the entity, be adjusted against MEC payable for another milestone.
4. CTUIL refunds 50% of MEC paid for land document and FC compliance, without interest, if the entity achieves COD for the full or part quantum of connectivity by the Regulation 24.6 due date plus an extended period of up to 2 (two) months. The refund corresponds to the capacity which achieved COD on time, and CTUIL must make it within 1 (one) month of the declaration of COD of that capacity.
5. A limited 2 (two)-month window immediately following GNA effectiveness is exempt from COD MEC in specified cases (where the Regulation 24.6 revocation trigger falls within 2 (two) months of the GNA effective date). No MEC is payable for such extended period. This waiver is subsumed within (not additional to) the overall 12 (twelve) month cap.

Other important conditions

1. The firm start date of connectivity does not change on account of any additional time permitted under the Order. Mismatch charges under the CERC (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2020 (“Sharing Regulations”) continue to apply throughout the extended period.
2. CTUIL applies 50% of MEC collected for land document/FC compliance and 100% of MEC collected for COD to reduce monthly inter-State Transmission System (“ISTS”) transmission charges under the Sharing Regulations. CTUIL holds the remaining 50% of Land Document/FC MEC in a separate bank account. CTUIL must return that amount to the entity if it qualifies for the 50% refund under Clause B(3) of the Procedure, and otherwise applies it, together with any interest accrued, to reduce monthly transmission charges under the Sharing Regulations.
3. The additional time permitted is entirely at the cost and risk of the entity and does not entitle the entity to modify, dilute or override the terms of the PPA.
4. An entity pays MEC because it failed to comply with the stipulated timelines and chose to seek an extension. MEC is therefore not a “change in law” event and does not qualify for any tariff adjustment or pass-through under the PPA. The nodal agency assesses eligibility for milestone extension for each individual connectivity grant, even where an entity holds multiple connectivity grants for a single PPA.

Illustrative cost impact – 300 (three hundred) MW project[1]

The illustration below shows the combined impact of MEC and indicative Interest During Construction (“IDC”) for a 300 (three hundred) MW ISTS connectivity grantee. It assumes that the entity has already availed the maximum permissible extension for land documents (3 (three) months) and FC (6 (six) months) as precursor milestones, and that COD has not been achieved on time, so the 50% Land/FC MEC refund does not apply.

Positive aspects

The Order:

1. provides regulatory certainty and a transparent, rule-based alternative to the ad-hoc case-by-case Regulation 41/Regulation 42 petition route before the CERC;
2. preserves scarce national ISTS connectivity/GNA capacity for genuinely progressing projects, while allowing non-serious holders to exit via revocation;
3. imposes a graded and escalating charge structure that creates a clear financial incentive for early compliance, rather than treating extension as a routine, low-cost option;
4. provides a partial refund mechanism and the option to adjust unused MEC against other milestones, which offer limited but meaningful relief to compliant entities; and
5. ensures that MEC proceeds benefit the wider system by reducing ISTS transmission charges under the Sharing Regulations.

Concerns and practical implications

The following concerns and practical implications arise from the Order:

1. No force majeure or ‘reasons not attributable to the developer’ carve-out: MEC is payable irrespective of the cause of delay, including delays attributable to CTUIL/transmission readiness. Several stakeholders flagged this concern during consultations.
2. Steep, escalating rates: The rate structure (particularly COD MEC beyond 6 (six) months, rising to INR 6,000 (Indian Rupees six thousand) per MW per day) imposes significant cash outflow at a stage where the project is not yet generating revenue.
3. Mandatory advance cash payment: MEC must be paid 15 (fifteen) days in advance in cash (bank guarantees not accepted), creating working-capital and liquidity pressure at a pre-revenue stage, especially for large industrial/captive consumers requiring multi-level internal approvals.
4. Immediate and uniform application to existing grantees: The MEC Procedure applies uniformly and immediately to existing connectivity grantees, without grandfathering or transition protection, despite requests for such protection.
5. Rigid land-documentation thresholds: The minimum thresholds (20% for Land/FC; 75%/50% for COD) may exclude developers whose delay stems from PPA/power sale agreement signing delays, lender due-diligence timelines, or ISTS/substation readiness, factors substantially outside the developer’s control.
6. Interface with the Draft Fourth Amendment to the GNA Regulations, 2026: The Draft Fourth Amendment proposes to compress the land-document and FC-document deadlines to 15 (fifteen) days from GNA effectiveness, a materially different trigger point from the current Regulation 11A(1) and Regulation 11A(2) timelines. This creates near-term transitional uncertainty as to which timeline/eligibility base applies once the Fourth Amendment is notified and will require the CERC to revisit and recalibrate the eligibility and timeline anchors of the MEC Procedure.

Conclusion

The Order converts what was previously a discretionary, case-by-case exercise of the CERC’s power to relax into a standardised, published compensation framework applicable uniformly to all eligible connectivity grantees. It provides much-needed regulatory certainty and a transparent, formula-based route to retain connectivity. However, MEC, continuing mismatch charges under the Sharing Regulations and ongoing IDC together raise the cost of any delay materially, including delays the project developer did not cause. Projects should reassess residual timelines, land progress, and liquidity headroom against the new MEC schedule, and factor the framework into financing models and risk-allocation discussions with lenders and offtakers.

Entities should review the full Order, including the Annexure-I Procedure and Annexure-II stakeholder comments, for project-specific application.

This Prism has been prepared by:

Vishnu Sudarsan Partner

Shashank Singh Partner

Ravneet Gill Associate

Shiv Sankar Associate

Vignesh Ravichandran Associate

For more details, please contact km@jsalaw.com.

[1] Note: The illustration is not part of the Order and has been prepared by the authors solely to demonstrate the potential cost impact, assuming a capital cost of INR 4.5 crore (Indian Rupees four point five crore) per MW, a debt-to-equity ratio of 70:30, and a cost of debt of 9.5% per annum. Actual figures will vary depending on project-specific capital cost, debt-equity mix, cost of debt, capacity utilisation and PPA tariff structure. The Grand Total excludes mismatch charges under the Sharing Regulations, which are payable separately, as the firm start date of Connectivity does not change on account of the additional time permitted under the Order.