Introduction

The case of Power Grid Corporation Of India Limited v. Karnataka Power Transmission Corporation Ltd. And Others adjudicated by the Central Electricity Regulatory Commission (CERC) on March 4, 2021, marks a significant development in the realm of electricity transmission tariffs in India. This petition, filed by the Petitioner, Power Grid Corporation of India Ltd. (PGCIL), seeks the determination of tariffs for specific transmission assets associated with the Kalpakkam PFBR-Kanchipuram project for the 2014-19 tariff period.

The core issues revolve around the delayed declaration of the Date of Commercial Operation (COD) for the transmission assets, the justification of capital and incidental expenditures, and the equitable sharing of transmission charges between involved parties. The respondents include generating companies and transmission utilities, notably TANGEDCO, who have raised objections concerning the allocation of costs and the impact of delays not attributable to PGCIL.

Summary of the Judgment

After thorough deliberation, CERC upheld several key propositions submitted by PGCIL. The Commission approved the COD of the 230 kV D/C Kalpakkam PFBR-Kanchipuram transmission line and associated assets as April 1, 2014, invoking Regulation 4(3)(ii) of the CERC Terms and Conditions of Tariff Regulations, 2014. This approval was granted despite the initial COD being set for April 1, 2012, due to delays not attributed to PGCIL. Additionally, CERC sanctioned the capital costs within the Revised Cost Estimate (RCE) and allowed for the capitalization of specific additional expenditures.

The Commission also addressed the sharing of transmission charges between TANTRANSCO and BHAVINI, mandated the reimbursement of filing and publication expenses, and clarified the conditions under which Goods and Services Tax (GST) could be recovered in the future. Notably, the CERC did not approve the capitalization of IDC and IEDC for the period of initial delay as PGCIL failed to substantiate the reasons for the overrun beyond the COD.

Analysis

Precedents Cited

The judgment heavily referenced prior decisions, notably:

• Appeal No. 168 of 2015 before the Appellate Tribunal for Electricity (APTEL), which denied PGCIL's initial petition due to delays caused by third parties.
• Judgments from the Hon'ble Supreme Court and other APTEL judgments that influenced the interpretation of Regulations 3(12)(c) and 4(3)(ii).
• Previous CERC orders, including those from Petition No. 105/TT/2012 and Review Petition No. 51/RP/2016, which set foundational norms for capital and incidental expenditures.

These precedents collectively guided the Commission in reassessing the circumstances under which PGCIL could claim tariff adjustments despite delays not caused by it.

Legal Reasoning

The Commission's legal reasoning hinged on the provisions of the CERC (Terms and Conditions of Tariff) Regulations, 2014, specifically Regulation 4(3)(ii). This regulation allows a transmission licensee to seek approval for the COD if delays are due to factors beyond its control, such as uncommissioned generating stations or transmission sub-stations managed by other entities.

PGCIL demonstrated that the COD delay stemmed from TANTRANSCO's sub-station not being ready and BHAVINI's delayed commissioning of the generating station. Supported by self-declarations and previous Judicial Committee (APTEL) observations, the Petitioner justified the late application for tariff determination. The Commission thus found merit in PGCIL's assertion that the delays were externally caused and not attributable to organizational or contractual lapses on its part.

Furthermore, in evaluating capital costs, IDC, and IEDC claims, the Commission meticulously verified the provided financial documents, ensuring compliance with the RCE and addressing discrepancies in loan amounts and capital allocations. The time overrun of 745 days was scrutinized, and without substantial evidence attributing the initial delay to PGCIL, IDC and IEDC for the period from April 1, 2012, to August 31, 2012, were not capitalized.

Impact

This judgment sets a notable precedent for future tariff determinations involving transmission assets. By recognizing delays caused by third parties and providing a clear pathway for COD approval under Regulation 4(3)(ii), CERC empowers transmission licensees to seek equitable tariff adjustments even when external factors impede project timelines.

Additionally, the meticulous approach in approving capital costs within the RCE and the conditional acceptance of additional expenditures underscore the Commission's commitment to regulatory compliance and financial prudence. The decision also clarifies the mechanisms for sharing transmission charges and handling future claims related to GST, thereby providing a comprehensive framework for similar cases.

Complex Concepts Simplified

Date of Commercial Operation (COD)

COD refers to the official date when a transmission asset becomes operational for regular service. Establishing COD is crucial as it marks the commencement of capitalization of expenditures and the calculation of applicable tariffs.

Interest During Construction (IDC)

IDC is the interest expense incurred on loans taken to finance the construction of transmission assets. It is a critical component of the capital cost that impacts the overall tariff determination.

Incidental Expenditure During Construction (IEDC)

IEDC encompasses the additional expenses related to the construction of transmission assets, such as maintenance spares and other incidental costs. It is essential to track and capitalize IEDC accurately to ensure fair tariff estimation.

Capital Cost and Revised Cost Estimate (RCE)

The capital cost includes all expenditures up to the COD, including IDC and IEDC. The RCE is an approved estimate that outlines the expected costs for the project. Ensuring that capital costs remain within the RCE is pivotal for regulatory compliance and financial accountability.

Conclusion

The CERC's judgment in Power Grid Corporation Of India Limited v. Karnataka Power Transmission Corporation Ltd. And Others reinforces the regulatory framework governing tariff determination for transmission assets. By approving the COD under circumstances beyond the licensee's control, the Commission not only upheld PGCIL's financial claims but also provided a clear precedent for handling similar delays in future cases.

This decision underscores the importance of adhering to regulatory provisions while also accommodating unforeseen external delays. It ensures that transmission licensees are not unduly penalized for factors outside their purview, thereby fostering a more collaborative and fair environment within the power transmission sector. The comprehensive approach to capital cost evaluation, alongside the detailed treatment of IDC and IEDC claims, highlights CERC's commitment to fostering transparency and equity in tariff determinations.