In the matter with the CERC (Procedure, Terms and Conditions for Grant of Transmission License and other related matters) Regulations to POWERGRID Kudankulam Transmission Ltd – EQ
Summary:
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### Key Business & Legal Points
#### 1. Transmission System Scope
| Transmission Element | Scheduled COD |
|———————|—————|
| KNPP 3&4 – Tuticorin-II GIS PS 400 kV (quad) D/C line | December 31, 2026 |
| 400 kV GIS line terminal equipment at Tuticorin-II GIS – 2 nos. | December 31, 2026 |
– **Project Nature:** 400 kV double-circuit transmission line with associated terminal equipment.
#### 2. Bidding & Selection Process
– **Bid Process Coordinator (BPC):** PFC Consulting Limited (PFCCL)
– **Selection Route:** Tariff-Based Competitive Bidding (TBCB) under Section 63 of the Electricity Act
– **Successful Bidder:** Power Grid Corporation of India Limited
– **Annual Transmission Charges (L1 Bid):** **₹690.03 million per annum** (approximately ₹69 crore)
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### Key Regulatory Decisions
#### 3. Determination on Transmission Charges (Critical Issue)
**Dispute:** Whether the transmission line should be treated as an **Inter-State Transmission System (ISTS) asset** with charges shared among all ISTS customers, or as a **Dedicated Transmission Line (DTL)** with charges borne solely by the generating station.
**CERC’s Ruling:**
| Aspect | Decision |
|——–|———|
| **Nature of Asset** | The transmission line is a **dedicated transmission line (DTL)** that should have been constructed by the generating station (NPCIL) at its own cost. |
| **Charge Recovery** | Entire transmission charges shall be **borne and paid solely by the generating station** (NPCIL), not by all India DICs. |
| **Billing Mechanism** | CTUIL shall raise monthly bills on NPCIL post-COD and reimburse the licensee. |
| **Regulatory Basis** | Under Section 10 of the Electricity Act, 2003, and Regulation 12.1 of the 2022 GNA Regulations, a generating company is required to establish, operate, and maintain its own dedicated transmission lines. |
| **Licence Grant** | Transmission licence granted as a **special case** using powers to relax under Regulation 21 of the 2024 Transmission Licence Regulations. |
#### 4. Licence Terms
– **Validity:** 25 years from the date of issue
– **Scope:** BOOT basis for the specified transmission system
– **Recovery Direction:** CTUIL to bill NPCIL; non-payment by NPCIL attracts regulatory action under Regulation 21 of the Sharing Regulations, 2022
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### Conditions of Licence (Key Extracts)
The licensee must comply with:
| Condition | Requirement |
|———–|————-|
| **Open Access** | Provide non-discriminatory open access to transmission system |
| **No Trading** | Not engage in electricity trading business |
| **Sharing Regulations** | Bound by 2020 Sharing Regulations, except as modified in para 13 |
| **Performance Standards** | Comply with Standard of Performance Regulations, 2012 |
| **EPC Contract** | Award EPC contract through competitive bidding |
| **Monitoring** | CTUIL and CEA to monitor execution and report lapses |
| **License Fee** | Pay fees under 2012 Payment of Fees Regulations |
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### Business Implications
#### 1. Precedent on DTL vs. ISTS Classification
This order establishes a critical precedent that transmission lines connecting a generating station to the grid, even if planned under ISTS and bid through TBCB, may be reclassified as **dedicated transmission lines** if they fall within the statutory definition under the Act. The Commission prioritized the **statutory framework** over the **bidding process classification**.
#### 2. Impact on Transmission Bidders
– Bidders in TBCB processes must carefully assess whether the project truly qualifies as ISTS or could be recharacterized as DTL.
– Reliance on bidding documents and MoP/NCT approvals **does not guarantee** the intended charge recovery mechanism if the asset’s nature conflicts with statutory provisions.
– This introduces **regulatory risk** for transmission developers participating in TBCB processes.
#### 3. Impact on Generating Companies (NPCIL)
– NPCIL is now liable for **full transmission charges** of approximately ₹69 crore annually post-COD.
– As beneficiaries of KNPP Units 3 & 4 are yet to be identified, NPCIL bears interim recovery risk.
– Non-payment may result in **regulatory enforcement** under Sharing Regulations.
#### 4. Impact on ISTS Customers (DICs)
– All India distribution licensees and other ISTS customers are **relieved** from cross-subsidizing a transmission line meant for a specific generator.
– Aligns with the principle that **cost causation should match cost allocation**.
#### 5. Policy Consistency
– The order reinforces the statutory framework that **generators bear the cost of their own connectivity infrastructure**.
– Signals that the Commission will not permit circumvention of statutory provisions through administrative classification or bidding processes.
#### 6. Risk for Future TBCB Projects
– Projects planned as ISTS but involving point-to-point connections from generators may face **similar reclassification risk**.
– Bidders should seek **explicit regulatory confirmation** of charge recovery mechanism before committing to bids.
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