A Deep Dive Into The Draft Guidelines For Virtual Power Purchase Agreements

Pursuant to a public notice dated May 22, 2025, the (Indian) Central Electricity Regulatory Commission ("CERC") released draft guidelines for virtual power purchase agreements ("VPPAs," and such draft guidelines, "Draft VPPA Guidelines"), inviting comments, suggestions, and/or objections from stakeholders and interested parties by June 20, 2025.

In general, while a 'physical' power purchase agreement ("PPA") involves the actual delivery of electricity from a power generator ("generator") to a consumer/ buyer, a VPPA is essentially a bilateral financial contract to provide a level of guarantee with respect to electricity prices, hedging against price fluctuations and future volatility. Accordingly, while the generator might sell the electricity it generates at a floating rate in the spot market, the VPPA counterparty might agree to buy a notional quantity of such power at a contractually pre-determined price ("strike price"). If the floating/ real-time cost