Precedents Cited

In deliberating the petition, the CERC referenced the landmark judgement by the Appellate Tribunal for Electricity (APTEL) dated April 27, 2011, in Appeal No. 72/2010. The APTEL had established foundational principles for handling time overruns in project execution, categorizing reasons for delays into those attributable to the generating company and those beyond its control.

The APTEL's guidelines emphasized:

• Attributable Delays: Cost overruns due to factors like imprudence in contractor selection, mismanagement, and financial mismanagement are to be borne by the generating company. Liquidated Damages (LDs) recovered could offset these costs.
• Non-Attributable Delays: Delays arising from force majeure or factors beyond the company's control may warrant additional cost recovery, with consumers benefiting from LDs.
• Shared Delays: Situations not falling under the first two categories would necessitate a shared approach to cost recovery between the company and consumers.

These precedents significantly influenced the CERC's approach in handling time overruns and associated cost recoveries in the present case.

Legal Reasoning

The CERC meticulously examined each prayer in the petition against the backdrop of existing tariff regulations. Key areas of focus included:

• Time Over-Run: The CERC observed that the time overruns in Assets-2 and 4 were not condoned in previous orders. Following APTEL's principles, it was determined that IDC and IEDC resulting from these overruns should not be capitalized. Consequently, LDs recovered from contractors could be retained by PGCIL to offset these disallowed costs.
• Interest During Construction (IDC): IDC was allowed up to the Scheduled Commercial Operation Date (SCOD). Any un-discharged IDC post-SCOD was added as ACE during the respective financial years.
• Initial Spares: The CERC validated PGCIL's claims for initial spares, ensuring they adhered to the ceiling limits specified in the 2014 Tariff Regulations.
• Depreciation: A critical aspect was the depreciation on IT Equipment. The CERC disallowed PGCIL's attempt to segregate IT costs during the truing-up of the 2014-19 period, maintaining consistency with prior petitions where depreciation was uniformly applied.
• Operation & Maintenance (O&M) Expenses: The CERC rejected PGCIL's separate claim for O&M expenses for PLCC equipment, reiterating that such expenses should be part of the overall sub-station O&M norms.
• Return on Equity (RoE) and Tax: RoE was grossed up based on the Effective Tax Rate (ETR) as per the MAT rates, ensuring compliance with Regulation 31 of the 2019 Tariff Regulations.

The legal reasoning was rooted in strict adherence to the tariff regulations, ensuring that PGCIL's claims were both justified and in line with regulatory frameworks.

Impact

This judgment holds significant implications for the power transmission sector:

• Regulatory Compliance: It underscores the need for transmission entities to strictly adhere to tariff regulations, especially concerning capital expenditures and depreciation.
• Handling Time Overruns: The CERC's decision reinforces the application of APTEL's principles, ensuring that delays attributable to the company bear the associated costs, while LDs can offset such overruns.
• Financial Governance: The judgment emphasizes robust financial management, especially in project execution phases, to avoid penalties and ensure cost recoveries are justified.
• Future Petitions: With this precedent, future petitions by transmission entities relating to truing-up and cost recoveries will be adjudicated with similar scrutiny, ensuring fairness and adherence to regulations.

Overall, the judgment promotes transparency and accountability, ensuring that transmission tariffs are determined fairly, balancing the interests of transmission entities and consumers.