CERC Clears India's First Shared 500 MW Pumped Storage Project with Key Deviations
CERC clears India's First shared 500 MW pumped storage project, approving key deviations for Madhya Pradesh and Uttar Pradesh procurement.
May 08, 2026. By EI News Network
The order allows the two states to utilise the same pumped storage plant on a complementary seasonal basis, Madhya Pradesh during the Rabi months from November to April and Uttar Pradesh for the remaining months from May to October, thereby maximising asset utilisation and reducing individual procurement costs.
The petition was jointly filed by Madhya Pradesh Power Management Company Ltd. (MPPMCL) and Uttar Pradesh Power Corporation Ltd. (UPPCL) under Section 63 of the Electricity Act, 2003, which mandates adoption of tariff determined through transparent competitive bidding. The petitioners argued that since the generation and sale of electricity would take place across more than one state, the matter fell under the 'composite scheme' provision of Section 79(1)(b) of the Act, making CERC the appropriate regulator. The Commission, citing the Supreme Court’s judgment in the Energy Watchdog case, agreed and held that “the moment generation and sale takes place in more than one State, the Central Commission becomes the appropriate Commission.”
The CERC, however, clarified that its role was strictly limited to approving deviations from the process defined in the Ministry of Power’s Tariff-Based Competitive Bidding Guidelines for Pumped Storage Plants issued on February 6, 2025, and not to approving the tender documents themselves. Following a public notice issued on October 7, 2025, the Commission received comments from major industry stakeholders including Adani, Renew, Tata, Torrent, Avaada and the Solar Power Developers’ Association. The petitioners filed an additional affidavit on January 15, 2026, addressing these concerns, and the matter was heard finally on March 3, 2026, before being reserved for order.
The Commission examined and approved six specific deviations sought by the petitioners. The first deviation extends the timeline for approaching the Commission for tariff adoption from 30 days to 60 days after issuance of the Letter of Award, a relaxation the petitioners sought due to the need for internal approvals in both states. The second deviation restricts the acceptable financial instruments for Earnest Money Deposit and Performance Bank Guarantee – only unconditional and irrevocable bank guarantees from scheduled or nationalised banks will be accepted, excluding Insurance Surety Bonds and Payment on Order instruments. The petitioners cited lack of clarity on surety bonds and absence of agreements with REC, PFC and IREDA for the alternative instruments.
The most significant deviation relates to penalties for delay in commissioning. While the standard guidelines mandate automatic capacity reduction and termination of the power purchase agreement if commissioning is delayed beyond six months from the scheduled date, the approved tender allows a grace period extending up to ten years from the effective date. Delays up to the eighth year attract per-day encashment of the original Performance Bank Guarantee, while delays between the eighth and tenth year require an additional guarantee equivalent to two years of annual fixed charge. Termination occurs only if commissioning fails after ten years. The petitioners argued that pumped storage projects have long gestation periods and are prone to geological surprises, and the Commission found merit in this staggered extension mechanism, stating it aligns with risk-sharing and infrastructure facilitation.
The fourth deviation adds preconditions for time extensions due to grid connectivity delays, the developer must have completed all formalities with the CTU, adhered to all applicable CERC/CEA/CTU procedures, and the delay must be solely attributable to the CTU, with the Lead Procurer authorised to decide on the extension. The fifth deviation replaces the standard penalty of 1.5 times the PPA tariff for under-achievement of target availability with an annual fixed charge-based formula, triggered when availability falls below 85 percent. The sixth deviation introduces stringent blacklisting provisions – any misleading information, hidden litigation, or bid withdrawal during the validity period will result in forfeiture of security deposits, rejection of the award, and blacklisting of the bidder and its affiliates from all MPPMCL tenders for two years.
The CERC noted that the proposed tender is 'unique and the first of its kind in India'and approved all six deviations, thereby allowing MPPMCL and UPPCL to formally float the tender documents and initiate the competitive bidding process. The selection of bidders will be conducted through an e-Reverse Auction on a bucket-filling basis under a Build-Own-Operate model, with a minimum bid capacity of 100 MW. The order also disposed of the related interlocutory application seeking urgent listing. Industry experts view the decision as a crucial enabler for pumped storage development in India, which is essential for meeting the government’s renewable energy and energy storage obligations.
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