Introduction

The case of Power Grid Corporation Of India Limited (Saudamini, Gurgaon-122 001 (S)) v. Central Electricity Regulatory Commission was adjudicated by the Appellate Tribunal for Electricity on April 22, 2021. This appeal centers around the restriction imposed by the Central Electricity Regulatory Commission (CERC) on the claim of Incidental Expenses During Construction (IEDC) by Power Grid Corporation. The appellant challenges the CERC's decision to limit the IEDC to 5% of the hard cost, despite condoning a significant time overrun in the project execution.

Summary of the Judgment

The Appellate Tribunal upheld the appellant's contention that the CERC erred in restricting the IEDC to a fraction of the hard cost as stipulated in the Tariff Regulations, 2014. The Tribunal emphasized that the CERC's action lacked adequate reasoning and was inconsistent with prior judicial interpretations. Consequently, the Tribunal set aside the CERC's impugned orders and directed the Commission to reassess the IEDC claims in alignment with the Tariff Regulations, 2014.

Analysis

Precedents Cited

The judgment references two pivotal decisions:

• Appeal Nos. 95 and 140 of 2018: In this decision, the Tribunal held that the CERC failed to correctly consider IEDC per the Tariff Regulations, 2014, emphasizing that such regulations are binding and must be adhered to by all stakeholders, including the Commission itself.
• Appeal No. 63 of 2020: This judgment reinforced the stance that any restriction on IEDC must be grounded in the regulatory framework, and arbitrary limitations are impermissible.

These precedents collectively underscore the necessity for regulatory bodies to strictly follow the established tariff regulations without imposing unwarranted restrictions.

Legal Reasoning

The Tribunal's legal reasoning hinged on the interpretation of Regulation 11(b)(2) of the Tariff Regulations, 2014. It was determined that:

• The regulation clearly allows for IEDC adjustments in cases of project delays due to uncontrollable factors, provided there is sufficient justification and documentation.
• The CERC's limitation of IEDC to 10.75% of the hard cost was arbitrary and not supported by the regulatory provisions or the circumstances of the case.
• The Tribunal dismissed the respondent's arguments regarding the applicability of earlier decisions and the nature of delays, reinforcing that the entire time overrun was condoned, thus entitling the appellant to full IEDC claims.

Furthermore, the Tribunal criticized the CERC's impugned order for its lack of reasoning, deeming it an "impermissible injudicious approach" that fails to uphold the adjudicatory standards.

Impact

This judgment has significant implications for the regulatory landscape:

• Regulatory Compliance: It reinforces the binding nature of tariff regulations and the necessity for regulatory bodies to adhere strictly to their provisions.
• IEDC Claims: Transmission and generation companies can expect greater assurance in claiming IEDC, provided delays are substantiated and fall within the ambit of uncontrollable factors as defined by the regulations.
• Judicial Oversight: The decision emphasizes judicial oversight over regulatory actions, ensuring that commissions act within their legal frameworks and provide adequate justification for their decisions.

Complex Concepts Simplified

Conclusion

The Tribunal's decision in Power Grid Corporation Of India Ltd. v. CERC underscores the paramount importance of adhering to established regulatory frameworks. By setting aside the CERC's arbitrary restriction on IEDC claims, the judgment affirms the rights of transmission and generation entities to claim legitimate additional expenses incurred due to uncontrollable delays. This not only enhances regulatory accountability but also ensures financial fairness in tariff determinations. Stakeholders within the energy sector must now place greater emphasis on meticulous compliance with tariff regulations to safeguard their financial interests.