Regulatory Disputes in Rajasthan’s Solar Energy Sector: Challenges of Connectivity and Blacklisting Issues

Posted On - 31 May, 2024 • By - King Stubb & Kasiva

Case Summary

In a landmark decision for Rajasthan’s solar energy sector, the Central Electricity Regulatory Commission (CERC) upheld the blacklisting of Soltown Infra Private Limited (SIPL) for alleged misrepresentation in a separate application.[1] However, CERC took a strong stance against the Central Transmission Utility of India Limited’s (CTUIL) actions regarding SIPL’s existing project.  The case centered on CTUIL’s decision to blacklist SIPL and revoke their granted grid connectivity for a 675 MW solar project. CERC criticized CTUIL for failing to follow proper procedures, specifically the lack of a show cause notice before revoking the connectivity. This violation of natural justice principles led CERC to allow SIPL to retain the existing connectivity and convert it to the new grid access regulations. The case underscores the importance of due process and established procedures, highlighting the need to balance strict regulations with fair treatment of developers for a healthy and sustainable renewable energy industry.

Case Timeline

  • May 2023: SIPL submits applications for grid connectivity – 1800 MW and 675 MW (separate applications).
  • July 2023: CTUIL issues show cause notices to SIPL alleging misrepresentation in the application documents for the 1800 MW project. CTUIL proposes revoking the granted connectivity for these 1800 MW.
  • August 2023: SIPL withdraws the applications for the 1800 MW project before a final decision from CTUIL.
  • September 2023: CTUIL blacklists SIPL and its directors for three years despite the withdrawal. CTUIL also revokes the already granted connectivity for the 675 MW project, without issuing a show cause notice.
  • October 2023: SIPL appeals both the blacklisting order and the revocation of connectivity to the Central Electricity Regulatory Commission (CERC).
  • February 2024: CERC issues its order.

Issue Raised

SIPL challenges two aspects of CTUIL’s actions:

  • Blacklisting: Does the blacklisting order unfairly target the existing 675 MW project?
  • Revocation of Connectivity: Did CTUIL violate natural justice principles by revoking the 675 MW connectivity without a show cause notice?

Appellant’s Arguments (SIPL)

The blacklisting should only apply to future applications and not impact the existing 675 MW project.

Revoking the 675 MW connectivity without a show cause notice denies them the right to be heard and defend themselves.

Judgment

  • CERC upholds the blacklisting for future applications due to the alleged misrepresentation.
  • CERC sets aside the revocation of the 675 MW connectivity as CTUIL failed to follow proper procedures.
  • CERC allows SIPL to retain and convert the existing connectivity to the new GNA Regulations 2022.

Analysis While the CERC’s decision to uphold the blacklisting for future applications discourages fraudulent practices, the distinction made for the existing project raises questions about potential loopholes.  If a blacklisted company can simply retain existing projects and operate under new regulations, the true deterrent effect of blacklisting might be diminished.  CERC could explore a stricter approach where blacklisting applies not only to future applications but also mandates stricter scrutiny of existing projects from blacklisted companies. This could ensure a more balanced approach that protects the integrity of the system while minimizing the risk of exploitation.

[1] https://cercind.gov.in/2024/orders/114-MP-2023.pdf