1. Introduction

The Central Electricity Regulatory Commission (CERC) delivered a pivotal judgment on February 4, 2021, concerning the Power Grid Corporation of India Ltd. (PGCIL). This case primarily addressed the truing up of transmission tariffs for the period from Commercial Operation Date (COD) to March 31, 2019, as per the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014 and the subsequent tariff determination for the 2019-24 period under the 2019 Tariff Regulations. The focus was on the 400 kV D/C (Quad) Kurukshetra-Jind Transmission Line within the Northern Region's transmission corridor in Chhattisgarh.

The petitioner, PGCIL, sought approval for trued-up tariffs, reimbursement of certain expenditures, and adjustments related to financial components like Return on Equity (RoE), Interest on Loan (IoL), and more. The respondents included various Electricity Departments, transmission, and distribution licensees benefiting from the transmission services.

2. Summary of the Judgment

The CERC meticulously examined the petitions filed by PGCIL, which encompassed claims for truing up tariffs, reimbursement of filing and publication fees, and adjustments pertaining to financial charges. The Commission evaluated the validity of these claims against established regulations and the submissions from various stakeholders, including BRPL and UPPCL.

Key determinations included:

• Approval of trued-up transmission tariffs for both the 2014-19 and 2019-24 periods.
• Reimbursement of filing fees and publication expenses in accordance with Regulation 70(1) of the 2019 Tariff Regulations.
• Allowance for PGCIL to recover Licensee and RLDC fees separately from the respondents as per Regulations 70(3) and 70(4).
• Consideration of IoL based on actual floating interest rates, subject to future truing up.
• Rejection of separate O&M expenses for PLCC equipment under Regulation 35(4) to prevent double recovery.
• Deferred handling of security expenses and capital spares to be addressed in separate petitions.

3. Analysis

3.1 Precedents Cited

The judgment references several previous orders to establish consistency and adherence to regulatory frameworks. Notably:

• Order No. 19/TT/2018: Earlier determination and allowance of transmission tariffs for the asset in question.
• Order No. 126/TT/2020: Delineated the non-admissibility of separate O&M expenses for PLCC equipment, preventing dual recovery.
• Order No. 9/TT/2020: Addressed similar claims across multiple petitions, ensuring uniform application of regulations.

These precedents reinforced the Commission's stance on maintaining clarity in tariff determination and preventing opportunistic claims that could lead to over-recovery from beneficiaries.

3.2 Legal Reasoning

The Commission's legal reasoning was grounded in strict adherence to the Tariff Regulations, ensuring that all claims were substantiated and within the regulatory provisions. Key aspects of the reasoning include:

• Adherence to Regulations: Each claim by PGCIL was meticulously cross-examined against the specific clauses of the 2014 and 2019 Tariff Regulations. For instance, the reimbursement of filing fees was upheld based on Regulation 70(1).
• Financial Adjustments: The Commission verified the truing up of financial components like RoE and IoL, ensuring calculations were in line with prescribed methodologies, including the consideration of floating interest rates and MAT (Minimum Alternate Tax) rates.
• Preventing Double Recovery: By disallowing separate O&M expenses for PLCC equipment, the Commission ensured beneficiaries were not burdened with excessive charges.
• Stakeholder Submissions: The Commission gave due weight to responses from BRPL and UPPCL, ensuring that all stakeholder concerns were addressed, leading to balanced and fair decisions.

The legal reasoning underscores the Commission's commitment to transparency, fairness, and regulatory compliance in tariff determinations.

3.3 Impact

This judgment has significant implications for future tariff determinations and regulatory compliance:

• Standardization of Claims: By providing clear guidelines on what constitutes admissible expenses, the judgment ensures uniformity across similar cases, reducing ambiguity.
• Financial Prudence: Emphasizing accurate truing up of financial components like RoE and IoL fosters financial discipline among transmission licensees.
• Protection of Beneficiaries: Preventing over-recovery through non-admissible claims safeguards the interests of beneficiaries, ensuring they only pay for justified costs.
• Regulatory Clarity: Clear demarcation of claims related to O&M expenses, security expenses, and capital spares sets a precedent for precise regulatory adherence.

Overall, the judgment reinforces the importance of meticulous regulatory compliance and balanced financial considerations in the transmission sector.

4. Complex Concepts Simplified

5. Conclusion

The CERC's judgment in the PGCIL case underscores the Commission's unwavering commitment to regulatory integrity, financial accuracy, and beneficiary protection in tariff determinations. By meticulously adhering to the prescribed tariff regulations and ensuring that all financial components are justly accounted for, the Commission has set a robust benchmark for future cases in the transmission sector.

Key takeaways include:

• The essential role of truing up in aligning tariffs with actual costs.
• The importance of accurate RoE and IoL computations in ensuring fair returns for licensees without overburdening beneficiaries.
• Clear demarcation of admissible expenses, preventing double recovery and ensuring financial prudence.
• The necessity for transmission licensees to maintain transparent and compliant financial practices to foster trust and accountability.

This judgment not only resolves specific financial and regulatory issues pertaining to PGCIL but also contributes to the broader legal landscape by reinforcing principles of fairness, transparency, and regulatory adherence in the energy transmission domain.