Introduction

The case of Power Grid Corporation of India Limited (PGCIL) v. Bihar State Power (Holding) Company Ltd. was adjudicated by the Central Electricity Regulatory Commission (CERC) on April 25, 2019. This case primarily revolved around PGCIL's petition for approval of transmission tariff and the determination of the date of commercial operation (COD) for transmission assets at Ranchi 400 kV Sub-station. The key issues addressed include the approval of tariff structures, adjustments in capital costs due to delays in project execution, and the application of regulatory provisions concerning commercial operations and time over-runs.

Summary of the Judgment

PGCIL sought approval for transmission tariffs associated with the development of transmission lines and substations under a common scheme in the Eastern Region. The petitioner also contested the determination of the COD for two 400 kV line bays at Ranchi Sub-station. The CERC meticulously reviewed the submissions, considering previous tribunal judgments, specifically the Appellate Tribunal for Electricity (APTEL) decision in Appeal No. 123 of 2011. The Commission ultimately approved the COD as April 1, 2014, capitalizing relevant costs from this date. Transmission charges from April 1, 2014, to August 29, 2017, were assigned to DVC, while charges post-August 30, 2017, were governed by the 2010 Sharing Regulations.

Analysis

Precedents Cited

The judgment extensively references the APTEL's decision in Appeal No. 123 of 2011, which clarified the conditions under which a transmission system or its elements could be declared as having attained COD. Specifically, the tribunal emphasized that for COD approval:

• The asset must have been successfully charged.
• Trial operations must have been successfully conducted.
• The asset must be in regular service.

Additionally, the APTEL judgment in Appeal No. 168 of 2015 concerning the Kalpakkam PFBR-Kanchipuram Transmission Line was pivotal. It underscored the Commission's authority to modify regulatory provisions to address delays not attributable to the transmission licensee, thereby influencing the CERC's approach in the PGCIL case.

Legal Reasoning

The core legal debate centered around the appropriate determination of COD and the consequent tariff implications. PGCIL initially claimed a COD of April 1, 2013, based on the readiness of the transmission bays. However, as per the APTEL's earlier judgment, this claim was disallowed due to the absence of operational transmission lines, which are critical for actual service commencement.

The 2014 Tariff Regulations introduced modifications to accommodate scenarios where transmission assets face delays beyond the licensee's control. Specifically, Proviso (ii) to Clause (3) of Regulation 4 allowed for COD approval despite such delays, provided the licensee demonstrated readiness of the asset independent of upstream or downstream failures.

In PGCIL's case, although the readiness of the bays was acknowledged, the associated 400 kV D/C Raghunathpur TPS-Ranchi Transmission Line experienced significant delays, ultimately commissioning on August 30, 2017. CERC, drawing parallels with the Kalpakkam case, approved the COD as April 1, 2014, ensuring only the period from this date to the actual commissioning date reflected capital cost adjustments.

Impact

This judgment reinforces the importance of accurately determining COD based on operational readiness rather than mere asset completion. It provides a clear framework for licensees and regulatory bodies to handle delays, ensuring that tariff adjustments are fair and reflective of actual service commencement. Future cases will likely reference this decision to balance capital cost recovery with the beneficiaries' interest in reasonable transmission charges.

Complex Concepts Simplified

Date of Commercial Operation (COD)

COD signifies the date when an asset becomes operational and starts providing service. It is crucial for determining the period over which costs like interest and depreciation can be capitalized and subsequently included in tariff calculations.

Time Over-Run

Time over-run occurs when a project is delayed beyond the scheduled date of commissioning. Regulatory frameworks often allow for the adjustment of costs and tariffs to account for such delays, provided they are justified and not due to the licensee's negligence.

Return on Equity (RoE)

RoE represents the profitability ratio that measures the ability of a company to generate profits from its shareholders' equity. In regulatory terms, it's a component of the tariff that ensures licensees earn a fair return on the capital invested.

Conclusion

The CERC's decision in PGCIL v. Bihar State Power (Holding) Company Ltd. underscores the regulatory body's role in ensuring transparent and fair tariff determinations. By adhering to both statutory regulations and judicial precedents, CERC balanced the interests of the licensee and the beneficiaries. The approval of the COD as April 1, 2014, coupled with judicious capital cost adjustments, sets a precedent for future tariff petitions, emphasizing the necessity of operational readiness and accountability in infrastructure projects.