In the matter of the CERC (Conduct of Business) and (Terms and Conditions of Tariff) Regulations for “Transmission System for Ultra Mega SPP at Banaskantha (Radhanesda), Gujarat” in the Western Region – EQ

Summary:

—

### Key Business Points

#### 1. Parties Involved
– **Petitioner:** Power Grid Corporation of India Limited (PGCIL).
– **Respondents:** Distribution companies (DISCOMs) and power departments from Western Region states (Madhya Pradesh, Maharashtra, Gujarat, Goa, Dadar & Nagar Haveli, Chhattisgarh).
– **Key Objector:** Madhya Pradesh Power Management Company Limited (MPPMCL).

#### 2. Project & Asset Details
– **Asset:** 400 kV D/C transmission line (95 km) from Banaskantha (Radhanesda) Pooling Station to Banaskantha (PG) substation, along with 2 bays.
– **Purpose:** Evacuation of power from a 700 MW Ultra Mega Solar Power Park.
– **Investment Approval (IA):** ₹17,564 lakh (Dec 2016 price level).
– **Commercial Operation Date (COD):** September 5, 2020 (with a 725-day delay, condoned by the Commission).
– **Cut-off Date for Capitalization:** September 30, 2023.

#### 3. Tariff Periods & Key Outcomes
The order approves two sets of tariffs:

| **Tariff Period** | **Regulations** | **Key Outcome** |
| :— | :— | :— |
| **2019-24 (Truing-up)** | CERC Tariff Regulations, 2019 | The Commission reviewed and adjusted PGCIL’s claimed capital costs, ACE, and other components, resulting in final allowed Annual Fixed Charges (AFC) for each year. |
| **2024-29 (Determination)** | CERC Tariff Regulations, 2024 | The Commission set the AFC for each year of this block based on the approved capital cost as of April 1, 2024, and projected expenses. |

#### 4. Key Financial Components Approved
The order details the prudence check and final allowed amounts for the following:

– **Capital Cost:**
– **As on COD (5.9.2020):** ₹13,374.14 lakh.
– **As on 31.3.2024:** ₹14,100.28 lakh.
– **Debt-Equity Ratio:** Maintained at 70:30 as per regulations.
– **Return on Equity (RoE):**
– **Base Rate:** 15.50%.
– **Grossed-up Rate (pre-tax):** 18.78% (considering a 17.472% MAT tax rate).
– The Commission clarified that the effective tax rate for grossing up should be based on the **notified MAT rates** for each financial year, not just the actual tax paid.
– **Operation & Maintenance (O&M) Expenses:** Allowed as per the normative rates specified in the regulations for the bays and transmission line length.
– **Interest on Working Capital (IWC):** Allowed based on SBI’s 1-year MCLR plus a spread (350 bps under 2019 regs, 325 bps under 2024 regs).
– **Depreciation:** Calculated using the straight-line method and weighted average rates as per the respective regulations.

#### 5. Special Rulings & Conditions
The order includes several important regulatory rulings:

– **Grant / Central Financial Assistance (CFA):**
– A CFA of ₹5,600 lakh was sanctioned by the Ministry of New and Renewable Energy (MNRE).
– ₹1,074.28 lakh was correctly adjusted against the capital cost of this specific asset.
– The balance of ₹4,525.72 lakh was adjusted against a separate “Supplementary Transmission Project.” MPPMCL’s challenge on this apportionment was noted, but the Commission allowed it based on the submission that it was within the project scope.
– **Sharing of Transmission Charges:**
– The Commission reiterated that **Gujarat Power Corporation Limited (GPCL)** , the solar park developer, is liable to pay a portion of the transmission charges until the associated solar generation capacity is fully commissioned.
– The order provides a detailed table specifying how GPCL’s liability reduced over time as generation was added, with the balance being included in the common pool for sharing among all beneficiaries.
– **Filing Fees & Publication Expenses:** PGCIL is allowed to recover these costs directly from beneficiaries.
– **CTUIL Fees:** PGCIL is permitted to bear the fees of the Central Transmission Utility of India Ltd. (CTUIL) and recover them as additional O&M expenses through a separate petition.
– **Security, Insurance & Capital Spares:** These were not claimed in this petition. The Commission allowed PGCIL to file a single consolidated petition for these items under Regulation 36(3)(d) of the 2024 Tariff Regulations.
– **GST:** The claim was deemed premature as GST is not currently levied on transmission services.

#### 6. Business Implications
– **For PGCIL:** The order provides regulatory certainty on the tariff to be recovered for this asset. It clarifies the treatment of grants and sets clear parameters for future claims (e.g., separate petition for security expenses).
– **For Beneficiaries (DISCOMs):** The order finalizes their past liabilities (for truing-up) and sets future tariff charges. It also clarifies the allocation of charges between the common pool and GPCL, ensuring they are not overcharged for generation that was not yet online.
– **For Developers (GPCL):** The order affirms its liability to bear transmission charges for the unutilized capacity of the solar park, a key cost consideration for project developers.
– **Regulatory Precedent:** The order reinforces the CERC’s approach to prudence checks, the treatment of grants, the application of normative tax rates for grossing up RoE, and the handling of liabilities related to associated generation projects.

—-

For more information please see below link: