Petition of the CERC (Conduct of Business), (Indian Electricity Grid Code) and (Terms and Condition of Tariff Regulations) for the Transmission System of Kallam Transmission Limited in the Western Region – EQ

Summary:

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**1. Document Nature & Core Issue:**
* This is a **regulatory proceeding record** from the **Central Electricity Regulatory Commission (CERC)**.
* **Petition No.:** 844/TT/2025.
* **Core Business Issue:** Determination of the **transmission tariff** for a specific electricity transmission asset under the **Regulated Tariff Mechanism (RTM)**.
* **Petitioner:** Kallam Transmission Limited (KTL).
* **Asset:** 1 No. 400 kV bay at Kallam PS, built to interconnect a renewable energy (RE) project by Torrent Solar Power Private Limited.
* **Tariff Period Sought:** From the Commercial Operation Date (COD) to **31st March 2029**.

**2. Current Status & Commission’s Directive:**
* A hearing was held on **20th January 2026**.
* The Commission has **not granted the requested tariff approval**.
* Instead, it has issued a detailed directive requiring KTL to provide significant clarifications and additional documentation **within two weeks**.
* The next hearing is scheduled for **19th March 2026**.

**3. Key Information Requests & Concerns Raised by CERC:**
The Commission’s queries indicate **critical scrutiny of KTL’s financial and project execution claims**. The required information falls into several high-risk areas for tariff determination:

* **A. Financial Consistency & Validation:**
1. **Capital Cost Mismatch:** Clarify discrepancies between the capital cost stated in the petition and the Auditor’s Certificate.
2. **Equity Contribution Mismatch:** Clarify discrepancies in equity contribution figures between the petition and Tariff Form-8.
3. **Tax Rate Justification:** Provide supporting documents for the tax rate used to “gross up” the Return on Equity (ROE)—a direct input affecting the final tariff.
4. **Financing Structure:** Explain the rationale for taking a loan from the parent company (an Infrastructure Investment Trust) instead of traditional banks/financial institutions. This likely relates to scrutiny of interest rates and arm’s-length transactions.

* **B. Operational & Planning Scrutiny:**
5. **Legible Tariff Forms:** Submit clear copies of key statutory forms (Tariff Forms 2 & 5), indicating initial submissions were inadequate.
6. **Liability Flow for ACE:** Submit a Liability Flow Statement for the Additional Capital Expenditure (ACE) planned for 2024-29, ensuring expenditure phasing is justified.
7. **ACE Justification:** Provide a detailed, asset-wise/work-wise breakdown of:
* Original project scope and cost estimates.
* Liabilities payable in the future.
* Works deferred from the original scope.
* This is to rigorously justify the need for the proposed Additional Capital Expenditure (ACE).

* **C. Security Assessment:**
8. **Security Requirements:** Detail the assessment for security requirements (like Letter of Credit, Bank Guarantee) for the upcoming tariff period, linking financial security to project risk.

**4. Implications for Business & Stakeholders:**

* **For Kallam Transmission Ltd (KTL):**
* **Approval Delay & Revenue Risk:** The tariff start date is delayed until these clarifications are satisfactorily addressed, directly impacting revenue certainty.
* **Regulatory Scrutiny:** The Commission is deeply examining cost prudency, financing choices, and future expenditure plans. Inadequate responses could lead to disallowance of costs, reducing the allowable tariff.
* **Action Required:** KTL must urgently compile a comprehensive, audit-backed response to all eight points. The quality of this submission will be critical for securing favorable tariff terms.

* **For Torrent Solar Power Pvt Ltd (Off-taker/RE Generator):**
* The tariff determined for this transmission bay will become a **pass-through cost** affecting the overall cost of power evacuation from their solar project.
* Delays or higher-than-expected tariffs determined by CERC could impact their project economics.

* **For Investors/Lenders (including the InvIT Parent):**
* The Commission’s questions about intra-group lending and capital cost validation highlight **governance and financial structuring risks**.
* The final tariff order will impact the project’s debt service coverage ratio and equity returns.

* **For the Market (Other Transmission Developers):**
* This proceeding sets a precedent for CERC’s scrutiny of **InvIT-backed transmission projects** and its approach to **Additional Capital Expenditure (ACE)** claims in the current regulatory cycle.

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