Introduction

The case of Powergrid Corporation Of India Limited (PGCIL) Saudamini Review v. National Thermal Power Corporation Ltd. (NTPC) And Others was adjudicated by the Central Electricity Regulatory Commission (CERC) on January 6, 2020. This Review Petition was lodged by PGCIL, seeking a reconsideration of a previous order dated February 20, 2019, concerning the inclusion of capital costs for Optical Ground Wire (OPGW) fiber optic cables in the determination of transmission tariffs.

The pivotal issues revolved around the accurate calculation of the total length of OPGW cables and the correct period from which the capital costs should be shared between PGCIL and the Powergrid Telecom Network (PTN).

Summary of the Judgment

The CERC, in its original order on February 20, 2019, recognized an error in the total length of OPGW fiber cables, incorrectly stated as 5256 km instead of the actual 7544 km. Furthermore, the Commission ruled that the capital costs of the shared OPGW cables should not be included in the transmission tariff. However, upon review, the Commission acknowledged the discrepancies highlighted by PGCIL. The final decision modified the original order to include the correct total length of OPGW cables and adjusted the capital cost sharing mechanism to account for the actual date of sharing assets with PTN rather than the Commercial Operation Date (COD).

Analysis

Precedents Cited

While the judgment did not explicitly cite previous case laws, it implicitly relied on established principles regarding the allocation of capital costs and the accurate determination of asset utilization in regulated tariffs. The decision aligns with the broader regulatory framework that mandates precise accounting of shared infrastructure costs to ensure fairness in tariff calculations.

Legal Reasoning

The core legal reasoning hinged on two main points:

• Accurate Asset Disclosure: PGCIL identified that the Commission had underestimated the total OPGW fiber length, which affected the capital cost allocation.
• Proper Cost Sharing Period: The original order incorrectly assumed that the cost sharing with PTN began from the COD of the assets. PGCIL argued, and the Commission agreed upon review, that cost sharing should commence from the actual date of asset sharing with PTN.

By rectifying the total OPGW fiber length and adjusting the start date for cost sharing, the Commission ensured that tariff calculations accurately reflected the true financial obligations of PGCIL.

Impact

This judgment has significant implications for how capital costs are allocated in shared infrastructure projects within the energy sector. It underscores the necessity for meticulous record-keeping and accurate reporting in tariff determination processes. Future cases involving shared assets will likely reference this precedent to advocate for cost allocations that commence from the actual date of shared asset utilization rather than assumed operational dates.

Complex Concepts Simplified

OPGW Fiber Optic Cables

OPGW stands for Optical Ground Wire, a type of cable used both for telecommunications and as a grounding conductor for electrical power lines. In this case, the OPGW cables are pivotal for both PGCIL's transmission operations and PTN's telecom network.

Capital Cost Inclusion

Capital costs refer to the expenses incurred in acquiring or maintaining fixed assets. For tariff determination, it is crucial to accurately include only those capital costs that are directly attributable to the transmission operations, excluding shared or non-operational expenditures.

Commercial Operation Date (COD)

COD is the date when a facility is fully constructed and begins its intended operations. In this context, the COD was initially used as the starting point for capital cost sharing with PTN, which was later deemed incorrect.

Conclusion

The CERC's judgment in the PGCIL Review Petition serves as a critical reminder of the importance of precision in regulatory processes, especially concerning cost allocations in shared infrastructure projects. By correcting the total length of OPGW fibers and adjusting the cost-sharing commencement date, the Commission ensured a fair and accurate determination of transmission tariffs. This decision not only rectifies the immediate discrepancies but also sets a precedent for future regulatory assessments, emphasizing the need for accurate data and appropriate cost-sharing mechanisms.