Introduction

The case of Power Transmission Corporation Of Uttarakhand Ltd. (PTCUL) v. Power Grid Corporation Of India Ltd. And Others was adjudicated by the Central Electricity Regulatory Commission (CERC) on June 13, 2021. This litigation centered on PTCUL's petition seeking approval for the Annual Fixed Cost (AFC) and determination of tariff for the licensed transmission business related to the 400 kV Srinagar-Srinagar PH transmission line for the financial years 2015-16 to 2018-19.

The petitioner contended delays in the commissioning of the transmission asset due to factors beyond its control, such as Right of Way (RoW) issues and forest clearance challenges. The respondent, Power Grid Corporation of India Ltd., opposed these claims, asserting that PTCUL had failed to execute necessary agreements and that the financial burden unfairly impacted consumers.

Summary of the Judgment

The CERC meticulously reviewed the filings, affidavits, and submissions from both PTCUL and Power Grid Corporation. The Commission acknowledged the delays caused by RoW issues and forest clearance but found insufficient evidence to condone certain delays without proper documentation. Consequently, CERC approved a portion of the AFC and directed PTCUL to provide additional documentation for uncondoned delays.

Furthermore, the Commission addressed the complexities surrounding the Investment Approval, Scheduled Commercial Operation Date (SCOD), Capital Cost, Interest During Construction (IDC), Return on Equity (RoE), Depreciation, Operation & Maintenance (O&M) Expenses, and Interest on Working Capital (IWC).

In the final order, CERC approved the sanctioned costs, conditioned on future submissions for true-up, and directed the involved parties to liaise with the Uttaranchal Electricity Regulatory Commission (UERC) for settling transmission charges collected from consumers.

Analysis

Precedents Cited

The judgment references multiple regulations under the Electricity Act, 2003 and the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014. Notably, the case builds upon the earlier order in Petition No. 133/MP/2012, where UITP was declared a deemed inter-State transmission system (ISTS). This precedent influenced the Commission's stance on cost recovery and tariff determination.

Legal Reasoning

The Commission employed a methodical approach to assess the petitioner’s claims. It scrutinized the Investment Approval process, verifying compliance with regulatory standards. The determination of SCOD was established based on trial operation certificates and affidavits. The Commission applied proportionality in condoning delays, allowing only those justified with adequate documentation.

Regarding financial components, the Commission adhered to regulations concerning IDC, RoE, and Depreciation. It provisionally allowed certain cost overruns while mandating future submissions for comprehensive validation. The jurisprudence underscores the importance of regulatory compliance and thorough documentation in tariff approvals.

Impact

This judgment sets a significant precedent in the realm of electricity transmission tariffs. It delineates the boundaries for condoning project delays, emphasizing the necessity for clear documentation and adherence to regulatory guidelines. Future cases will likely reference this order when addressing similar issues of cost overruns, delay justifications, and tariff approvals.

Moreover, the directive to segregate intra-State and inter-State transmission charges enhances clarity in financial responsibilities, potentially streamlining future transmission projects’ financial management and tariff formulations.

Complex Concepts Simplified

1. Investment Approval

Investment Approval refers to the formal sanction provided by the Board of the generating company, transmission licensee, or a competent authority, allowing funding and setting timelines for a project’s implementation.

2. Scheduled Commercial Operation Date (SCOD)

SCOD signifies the planned date when a transmission asset is expected to become operational for commercial purposes, as outlined in the Investment Approval or contractual agreements.

3. Interest During Construction (IDC)

IDC refers to the interest costs incurred on loans taken to finance the construction of transmission assets. Regulation dictates how IDC is calculated and applied in tariff determinations.

4. Return on Equity (RoE)

RoE represents the profit generated on the equity invested in the transmission project. It is calculated based on a base rate adjusted for the effective tax rate or Minimum Alternate Tax (MAT) rate.

5. Depreciation

Depreciation is the systematic allocation of the capital cost of transmission assets over their useful life, reflecting the wear and tear or obsolescence of the assets.

Conclusion

The CERC's judgment in the PTCUL v. Power Grid Corporation case underscores the critical balance between accommodating unforeseen project delays and maintaining stringent regulatory oversight. By condoning delays with substantiated justifications and mandating transparency in financial submissions, the Commission reinforces the integrity of tariff determination processes.

For stakeholders in the electricity transmission sector, this judgment highlights the importance of meticulous documentation and proactive engagement with regulatory bodies. It serves as a guiding framework for future projects, ensuring that financial and operational challenges are navigated with compliance and accountability.

Ultimately, this case contributes to the evolving landscape of electricity regulation in India, promoting efficient transmission infrastructure development while safeguarding consumer interests.