CERC Rules on Transmission Tariff Approval and Charge Sharing for Early Commercial Operation of Transmission Assets

Introduction

The case of Power Grid Corporation Of India Limited (PGCIL) vs. Karnataka Power Transmission Corporation Ltd. (KPTCL) And Others was adjudicated by the Central Electricity Regulatory Commission (CERC) on February 25, 2021. PGCIL filed a petition seeking the determination of tariffs for specific transmission assets under the 2014-19 tariff period as per the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014.

The core issues revolved around the approval of transmission tariffs, the allocation of capital costs, interest during construction, return on equity, and the handling of charges associated with the early declaration of the Commercial Operation Date (COD) for certain transmission assets. The respondents included TANGEDCO and Warora-Kurnool Transmission Limited (WKTL), who contested various aspects of PGCIL's claims.

Summary of the Judgment

CERC approved the transmission tariff for the specified transmission assets, allowing PGCIL to recover certain capital and operational costs. The Commission acknowledged PGCIL's early declaration of COD for voltage management at the Kurnool Sub-station, based on the minutes of the 35th SRPC meeting. However, due to delays in the associated transmission lines executed by WKTL, the Commission directed PGCIL to approach SCM/RPC for the continued use of the line reactors beyond the scheduled COD. The annual transmission charges approved amounted to ₹102.58 lakh for the year 2018-19 (pro-rata for 21 days).

Analysis

Precedents Cited

The judgment references the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014 extensively, particularly:

Regulation 9: Pertaining to Capital Cost determination.
Regulation 26: Governing Interest During Construction (IDC).
Regulation 24 & 25: Relating to Return on Equity (ROE) calculations.
Regulation 52: Addressing reimbursement of filing and publication expenditures.

The judgment also references previous CERC orders, such as the one dated January 25, 2016, in Petition No. 253/TT/2015, which dealt with the allocation of transmission charges in cases of delays caused by upstream or downstream transmission systems.

Legal Reasoning

The Commission基於以下理由作出判決：

Early COD Approval: Based on the 35th SRPC meeting minutes, where voltage issues necessitated the early commissioning of line reactors.
Charge Allocation: Since WKTL delayed the COD of its transmission lines due to force majeure events, the charges from PGCIL's COD to WKTL's COD are to be borne by WKTL.
Regulatory Compliance: All claims for capital cost, IDC, IEDC, initial spares, and other financial components were evaluated based on the 2014 Tariff Regulations.
Operational Utilization: The Commission recognized that the line reactors were utilized for voltage control, thereby justifying the early COD despite the incomplete transmission line commissioning.

Impact

This judgment sets a significant precedent for the approval of tariffs and cost recovery mechanisms when assets are commissioned early due to operational exigencies. It clarifies the responsibilities of entities like WKTL in bearing transmission charges when their delays impact the utilization of assets by entities like PGCIL. Future cases involving early COD declarations and associated cost allocations will likely reference this judgment for guidance.

Complex Concepts Simplified

Commercial Operation Date (COD)

The COD is the date when a project, such as a transmission asset, becomes fully operational and capable of delivering its intended service. Early COD can be granted under specific circumstances, such as operational necessities like voltage control.

Transmission Tariff

This refers to the charges levied for the use of the transmission network to transport electrical power from producers to consumers. Tariff determination involves calculating various costs associated with the transmission assets.

Interest During Construction (IDC)

IDC is the interest payable on borrowed funds or invested equity in a project during its construction phase. It is capitalized and later included in the project’s capital cost.

Return on Equity (ROE)

ROE represents the profit a company earns on its shareholders' invested capital. In regulatory contexts, it ensures that investors receive a fair return on their investments in infrastructure projects.

Conclusion

The CERC’s ruling in the PGCIL vs. KPTCL case underscores the regulatory body's balanced approach in tariff determination, ensuring both operational efficiency and fair cost recovery. By approving the transmission tariff and capital costs under the stipulated regulations, while also delineating charge responsibilities amidst project delays, CERC provides a clear framework for future cases involving early COD declarations and associated financial implications. This judgment not only facilitates the smooth functioning of critical transmission infrastructure but also reinforces accountability among involved parties.