BEFORE THE CENTRAL ELECTRICITY REGULATORY COMMISSION
Petition No. 12/99,
13/99, 14/99 and 16/99
1. Shri S.L. Rao, Chairman
the matter of
the matter of
following were present :-
1. Shri Parag Tripathi, Sr.
The Petitioner, Power Grid Corporation of India, has filed these
petitions for the Commission’s approval to the incentive for the years
1997-98 and 1998-99 for Eastern Region (Petition No. 12/99), Western
Region (Petition No. 13/99), Southern Region (Petition No. 14/99) and
Northern Region (Petition No. 16/99), based on the availability of the
transmission system during these years.
Interlocutory applications have been filed by the petitioner for
interim order in its favour
pending final disposal of the petitions which have been dealt with
appropriately. The parties
have raised certain questions of law, common to all these petitions and,
therefore, these petitions were heard together.
2. The petitioner is a Government of India Undertaking, incorporated
under the Companies Act, 1956 as National Power Transmission Corporation
Limited, later on re-named as Power Grid Corporation of India (Powergrid)
with effect from 23.10.1992 and has been notified as Central Transmission
Utility by the Central Government in exercise of powers under sub-section
(1) of section 27A of the
Indian Electricity Act, 1910. The
main objects of the petitioner company, inter
alia, include development of power system network and to carry on
manufacturing, trading and other business.
The petitioner took over the transmission functions from NTPC,
NHPC, NLC and NEEPCO w.e.f. 1.4.1992.
As the norms for transmission tariff were not decided, tariff for
the various transmission systems used to be notified, by the Central
Government on system to system basis.
3. The Central
Government vide Notification No. 2/3/Powergrid/Tariff/97, dated
16.12.1997, prescribed the norms and factors in accordance with which the
tariff leviable for transmission of electricity by
Powergrid to the Boards and other persons, called the beneficiary,
shall be determined. The notification, inter
alia, prescribed 95% normative availability of the transmission
system. Paras 6 and 7 of the
notification lay down the manner of computation of annual transmission
charges. According to
these provisions, full annual transmission charges shall be recoverable at
95% availability of operation. Para
8 of the notification which relates to payment of incentive, reads as
In addition to the transmission charges, ‘POWERGRID’ shall be paid incentive as under:
availability of the system beyond 95 percent the rate of incentive shall
not exceed 1.0 percent return on equity for each percentage point of
increase in availability.”
4. Para 11 of the
notification dated 16.12.1997, makes certain general provisions and for
facility of reference the said para is reproduced below:-
11.1 The tariff for transmission of electricity by ‘Transmission Utility’ to a Board may also be determined in deviation of the norms, other than the norms specified in this notification subject to the condition that:-
(a) The overall tariff of electricity transmitted calculated on the basis of
the norms in deviation does not exceed the tariff calculated on the basis
of the norms specified in this notification.
(b) The concerned State Government(s) has, after satisfying itself,
recommended that the deviations made are justified; and
(c) The Central Government after satisfying itself that the overall per unit
tariff is in accordance with condition (a) above, approves the deviation.
This notification shall be valid for the existing and new
transmission systems of POWERGRID and shall be applicable with effect from
1st April, 1997.
The tariff shall be computed financial year wise starting from the
financial year 1997-98 for a period of 5 years, or such longer period as
agreed to by POWERGRID and
the beneficiaries in its transmission service agreement.
For assets commissioned on or after 1.4.97, the annual transmission
charges as detailed in para 6 shall be applied for the first financial
year on pro-rata basis for completed months of use.
the time of computing the tariff for a block of five years as above
escalation @ 10% per annum on the O&M charges computed at the rates
given at para 6 (c) will be considered which shall be subject to year end
adjustment after availability of final indices for the relevant year.”
5. Based on the terms and conditions laid down by the Central Government for transmission tariff, the tariff applicable to individual transmission systems was notified by the Central Government. The tariff notifications issued by the Central Government keeping in view the norms prescribed under the notification dated 16.12.1997, and stated to be by virtue of powers conferred by Section 41(1) of the Electricity (Supply) Act, 1948, the Supply Act, are as under and these notifications too make .provisions for payment of incentive:
(i) Notification dated 20.7.1998 for WR Transmission System.
The above region-wise principal tariff notifications were subsequently amended in consideration of commercial operation of additional transmission lines and associated bays. A notification dated 4.2.1999, further prescribed that the availability of the transmission system shall be certified by the Regional Electricity Board.
6. Meanwhile, the Electricity Regulatory Commissions Act 1998 (the
Regulatory Commissions Act) was enacted.
In exercise of power conferred under sub-section (1) of section 3
of the Regulatory Commissions Act, the Central Electricity Regulatory
Commission was constituted vide notification dated 24th July,
1998. The Central Commission
has, inter alia, been assigned
the function of regulating the inter-state transmission of energy
including tariff of the transmission utilities in terms of section 13(c)
of the Regulatory Commissions Act. By
virtue of powers under section 51 of the Regulatory Commissions Act, the
Central Government has omitted with effect from 15.5.1999 Section 43 A (2)
of the Supply Act, which authorised the Central Government to determine
the terms, conditions and tariff for “sale of electricity” by a
Generating Company, wholly or partly owned by it.
7. Before coming to the
core issues, it may be necessary to take note of certain other related
developments. The Parliament enacted the Electricity Laws (Amendment) Act,
1998 (the Amendment Act) which came into force w.e.f. 31.12.1998.
In terms of Section 10 of the Amendment Act, Section 41 of the
Supply Act was
substituted as under:-
“41. Use of transmission lines-
(1) Until the Central Commission is
established, the Central Government and thereafter the Central Commission
in the case of inter-State transmission system and until the State
Commission is established, the State Government and thereafter the State
Commission in the case of intra-State transmission system may determine
the charges payable to the Central Transmission Utility or State
Transmission Utility as the case may be, for the use of transmission
system by a Board, its successor entity, generating company, licensee or
any other person.
(2) The Central Transmission Utility or State Transmission Utility, as the
case may be, may enter into an agreement with any transmission licensee
for the exclusive use of the transmission system constructed, maintained
and operated by the transmission licensee.”
(3) Where the Central Transmission Utility or the State Transmission
Utility, as the case may be, considers it necessary to use for any purpose
any transmission system or transmission line or main transmission line of
a generating company or a licensee, it shall have the power to use such
lines to the extent to which the capacity thereof is surplus to the
requirements of the generating company or the licensee on payment of
charges calculated in accordance with the provisions of the Fifth
8. Section 41 of the Supply Act, as it stood prior to amendment is reproduced below:
41. Use by Board of transmission lines. -
(1) Where the Board or a Generating Company
considers it necessary to use for any of its purposes any transmission
lines or main transmission lines of a licensee, the Board or a Generating
Company shall have power to use such lines to the extent to which the
capacity thereof is or thereafter remains surplus to the requirements of
the licensee for the transmission of electricity, on payment of charges
calculated in accordance with the provisions of the Fifth Schedule.
(2) The Board or a Generating Company may, by agreement with any licensee or
other person, use any transmission line or main transmission line of that
licensee or person for such time and upon such terms as may be agreed.
9. The petitions before
us relate to incentive relating to 1997-98 and 1998-99.
In these petitions, the petitioner has based its claim for
incentive on the Central Government notifications adverted to above, which
as already noted are founded on the norms laid down in Central Government
notification dated 16.12.1997. However,
the certification of Availability has been done by the RLDCs and not by
REBs as provided in Central Government notification dated 4.2.1999.
10. The respondents in these
petitions have opposed the relief prayed for by the petitioner.
The main grounds of attack by the respondents are that the tariff
notifications issued by the Central Government after establishment of the
Central Commission are without
legal force; that
certification of Availability by RLDCs is
not in order; that methodology
for working out Availability of transmission system had not been specified
by the Central Government and the petitioner while calculating
Availability has assigned equal weightage to all the elements of the
transmission system, which has caused distortions in calculations; that
the outages attributable to other factors also need to be excluded for
calculating the system Availability; that incentive should be payable at normative Availability of
98% as recommended by the National Task Force or higher Availability
against 95% Availability
notified by the Central Government; that rate of incentive is on the
higher side; that the
petitioner did not consult the beneficiaries as provided in
the Bulk Power Transmission Agreement before approaching the
Commission, and that the petitioner is not honouring the equity fixed by
the Central Government as it has claimed incentive based on higher equity
than notified by the Central Government and the claim is over and above
the reasonable return on the capital employed.
11. In the pleadings, the respondents
have raised certain legal issues Therefore, before going into the merits
of the claim of the petitioner and the contentions raised on behalf of the
respondents, the Commission considered it appropriate to address in the
first instance these preliminary legal issues.
Accordingly, the Commission, through its order dated 20.12.1999,
formulated the following preliminary legal issues for
consideration and adjudication:-
(a) The validity of the transmission tariff notified by the Central
Government after establishment of the Commission.
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