In the matter of CERC (Conduct of Business) and (Terms and Conditions of Tariff) Regulations for truing up and the determination for “Transmission System for controlling high Short Circuit” in the Southern Region – EQ
Summary:
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#### Key Details:
– **Petitioner:** Power Grid Corporation of India Limited (PGCIL).
– **Regulatory Authority:** Central Electricity Regulatory Commission (CERC), New Delhi.
– **Date of Order:** 26th February 2026.
– **Project Name:** Transmission System for controlling high Short Circuit Current level at 400 kV Thiruvalam S/s (Southern Region).
– **Asset Details:**
– **Asset-1:** Installation of fault limiting bus series reactors (12Ω, 420 kV) at Thiruvalam Substation, including 4 nos. 400 kV bays and associated reconfiguration of transmission lines (bypassing Kolar-Thiruvalam and Thiruvalam-Sriperumbudur lines to form Kolar-Sriperumbudur direct line).
– **Commercial Operation Date (COD):** 13th April 2022.
– **Respondents:** 14 distribution licensees and electricity departments from the Southern Region (Tamil Nadu, Kerala, Goa, Puducherry, Andhra Pradesh, Telangana, Karnataka), who are the beneficiaries of this transmission system.
#### Purpose of the Petition:
1. **Truing Up (2019-24):** To finalize the Annual Fixed Charges (AFC) for the previous tariff period by reconciling estimated costs with actual incurred costs for the asset which was commissioned during this block (FY 2022-23 & 2023-24).
2. **Tariff Determination (2024-29):** To set the AFC for the current tariff period based on the approved capital cost and regulatory norms.
#### Key Financial Outcomes & Approvals:
##### A. Trued-Up Annual Fixed Charges (2019-24)
The Commission approved the final, trued-up tariffs for the portion of the previous block during which the asset was operational.
| Asset-1 | 2022-23 (Pro-rata from 13.4.2022) | 2023-24 |
| :— | :— | :— |
| **Trued-Up AFC Approved (in ₹ Lakhs)** | **381.94** | **692.24** |
##### B. Determined Annual Fixed Charges (2024-29)
The tariffs for the current block were determined based on the approved capital cost as on 31.3.2024 and forward-looking norms.
| Asset-1 | 2024-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 |
| :— | :— | :— | :— | :— | :— |
| **AFC Allowed (in ₹ Lakhs)** | **655.44** | **655.44** | **655.44** | **655.44** | **655.44** |
*(Note: The AFC remains constant over the tariff block, reflecting stable financing costs and O&M norms.)*
#### Key Regulatory & Business Considerations:
1. **Capital Cost Prudence Check:** The Commission admitted a capital cost of **₹5,923.18 Lakhs** as on COD (13.04.2022) and an additional capitalization of **₹136.15 Lakhs** up to 31.03.2024, resulting in a total approved capital cost of **₹6,059.33 Lakhs** as on 31.03.2024. This forms the rate base for the 2024-29 tariff period.
2. **Debt-Equity Norms:** The standard 70:30 debt-equity ratio was maintained throughout. For the 2024-29 period, the opening equity is calculated as 30% of the capital cost as on 1.4.2024 (₹1,817.80 Lakhs).
3. **Return on Equity (RoE):** PGCIL is entitled to a base RoE of **15.50%** . Since the company is under the Minimum Alternate Tax (MAT) regime, this rate is grossed up to an effective pre-tax RoE of **18.782%** for the 2024-29 period. The tax rate will be trued-up annually based on actuals.
4. **Interest on Loans (IoL):** Interest is calculated on the normative loan amount using the weighted average interest rate from PGCIL’s actual loan portfolio (approved at ~7.66% for FY25, declining over the block as loans are repaid).
5. **Operational Efficiency:** Operation & Maintenance (O&M) expenses were allowed strictly as per CERC norms (for reactors and bays), not as per actuals claimed, ensuring cost control for beneficiaries. The norms escalate annually (e.g., from ₹7.24 Lakh per reactor in FY25 to ₹8.89 Lakh in FY29).
6. **Working Capital:** Interest on working capital is allowed at a rate linked to SBI’s 1-year MCLR plus a margin (e.g., 11.90% for FY25). The working capital components include one month’s O&M, 15% of O&M for spares, and 45 days of receivables.
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