Introduction

The case Power Grid Corporation Of India Limited v. Karnataka Power Transmission Corporation Ltd. And Others was adjudicated by the Central Electricity Regulatory Commission (CERC) on February 5, 2021. This litigation centered on the determination of transmission tariffs and the approval of the Commercial Operation Date (COD) for specific transmission assets associated with the Ultra Mega Solar Park in Anantpur District, Andhra Pradesh.

The Petitioner, Power Grid Corporation of India Ltd. (PGCIL), sought regulatory approval for various financial and operational aspects related to the transmission assets under the “Transmission System for Ultra Mega Solar Park in Anantpur District, Andhra Pradesh - Part C (Phase-III)”. The respondents included Karnataka Power Transmission Corporation Ltd. and other entities involved in the project.

The key issues revolved around tariff approval, capital expenditure claims, handling of delays in project completion, reimbursement of expenses, and the billing of transmission charges in light of delays in the commissioning of associated renewable generators.

Summary of the Judgment

The CERC meticulously reviewed PGCIL's petitions regarding the determination of transmission tariffs and the approval of COD for three specific assets at the NP Kunta Sub-Station. The Commission evaluated claims related to capital costs, additional capital expenditures, interest during construction, incidental expenditures, initial spares, Central Finance Assistance (CFA), and operating & maintenance (O&M) expenses.

Key decisions include:

• Approval of COD for Asset-1 and Asset-2 based on submitted certificates.
• Conditional approval of COD for Asset-3, considering the delay in commissioning associated generation systems.
• Disallowance of time overruns attributable to PGCIL's decisions and lack of documentary evidence for certain delays.
• Approval of Interest During Construction (IDC) and Incidental Expenditures During Construction (IEDC) claims, subject to future truing-up.
• Reimbursement of filing and publication expenses as well as licensing and Regional Load Despatch Centre (RLDC) fees.
• Rejection of the GST reimbursement claim due to the current non-levy on transmission services.
• Direction for PGCIL to recover transmission charges from beneficiaries or APSPCL (Andhra Pradesh Solar Power Corporation Pvt. Ltd.) based on the commissioning of solar generators.

Analysis

Precedents Cited

The judgment extensively referenced existing CERC regulations and prior orders to establish its legal framework:

• Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014: Specifically Regulations 4(3), 8, 9, 13, 14, 19, 24, 25, 26, and 29 outlined procedures for tariff determination, capital costs, interest calculations, and more.
• Grid Code Regulation 6.3A (4)(iv): Provided guidelines for declaring COD in interstate transmission systems.
• CERC (Sharing of interstate Transmission Charges and Losses) Regulations, 2010: Governing the billing and recovery of transmission charges.
• Precedent Order dated 6.8.2015 in Petition No. 29/MP/2015: Clarified the liability of transmission charges in scenarios of delayed commissioning by solar generators.

Legal Reasoning

The Commission's legal reasoning was methodical and hinged on adherence to existing regulations. Key points include:

• Codification of COD: The Commission approved the COD for Assets-1 and -2 based on valid certificates. For Asset-3, approval was granted under specific regulatory provisions due to delays in associated generation commissioning.
• Time Overrun Disallowance: Delays attributable to PGCIL's own decisions, such as matching transmission assets with generation projects, were not condoned due to lack of documentary evidence.
• IDC and IEDC Claims: While some claims were approved, discrepancies in submissions led the Commission to subject certain claims to future truing-up.
• Reimbursement Claims: The Commission approved reimbursement for filing and publication expenses, aligning with Regulation 52 of the 2014 Tariff Regulations.
• Transmission Charges: Based on the commissioning status of solar generators, the Commission directed PGCIL to recover transmission charges accordingly, ensuring compliance with prior orders and regulations.

Impact

This judgment has several implications for future transmission projects, particularly in the renewable energy sector:

• Strict Adherence to Regulations: Entities must ensure meticulous compliance with CERC regulations, especially regarding documentation and adherence to timelines.
• Clarity on COD Approval: The decision clarifies the conditions under which COD can be approved, especially in interconnected projects where delays in one segment affect others.
• Handling of Delays: Emphasizes the necessity for clear contractual agreements to handle delays attributable to different parties, avoiding unsubstantiated claims.
• Financial Claims Scrutiny: Highlights the importance of accurate and consistent financial reporting, as discrepancies can lead to disallowances and future truing-ups.
• Transmission Charge Recovery: Provides a precedent for how transmission charges should be recovered in scenarios of partial commissioning of associated generators.

Complex Concepts Simplified

Commercial Operation Date (COD)

Definition: COD is the date from which an asset (like a transmission line) is considered operational and begins to deliver services.

Regulatory Context: As per Regulation 4(3) of the 2014 Tariff Regulations, COD is declared once an asset is in regular service after successful trial operations. Specific provisions exist for delays not caused by the transmission licensee.

Interest During Construction (IDC)

Definition: IDC refers to the interest expense incurred on loans taken during the construction phase of a project.

Regulatory Context: Regulation 9 of the 2014 Tariff Regulations outlines how IDC should be calculated, capped, and approved for inclusion in tariff determination.

Additional Capital Expenditure (ACE)

Definition: ACE pertains to costs incurred beyond the initially approved capital expenditure during the project’s implementation phase.

Regulatory Context: Regulation 14 of the 2014 Tariff Regulations governs the approval and inclusion of ACE in tariff calculations, subject to verification and truing-up.

Transmission Charges and Sharing Regulations

Transmission Charges: Fees levied for the use of transmission infrastructure to evacuate power from generation units to consumers.

Sharing Regulations: Govern how transmission charges are allocated among different stakeholders, including provisions for waivers under specific conditions, such as timely commissioning of generation projects.

Conclusion

The judgment in Power Grid Corporation Of India Limited v. Karnataka Power Transmission Corporation Ltd. And Others underscores the Central Electricity Regulatory Commission's commitment to stringent regulatory compliance and financial prudence in tariff determinations. By disallowing unjustified delays and ensuring detailed scrutiny of financial claims, the Commission sets a robust precedent that mandates transparency and accountability from transmission licensees.

This decision not only reinforces the importance of adhering to established regulations but also provides a clear framework for handling delays and financial discrepancies in future projects. Entities involved in similar infrastructure projects must heed these guidelines to ensure smooth regulatory approvals and tariff determinations.

Overall, the judgment serves as a pivotal reference point for regulatory oversight in the power transmission sector, particularly within the burgeoning renewable energy landscape, fostering a more disciplined and transparent operational environment.