CERC Approves Trued-Up and New Transmission Tariffs for Power Grid's Korba III System - 2025-03-24

CERC Greenlights Power Grid 's Transmission Tariffs for Korba III System

New Delhi, March 20, 2025 - The Central Electricity Regulatory Commission (CERC) has issued an order approving the trued-up transmission tariff for the 2019-24 period and determining the tariff for the 2024-29 period for Power Grid Corporation of India Limited's (PGCIL) "Korba III Transmission System" in the Western Region. The decision, rendered by a bench comprising Shri Ramesh Babu V. and Shri Harish Dudani, Members, follows Petition No. 223/TT/2025 filed by PGCIL under Section 62 and Section 79(1)(d) of the Electricity Act, 2003, and relevant CERC regulations.

Background and Petition

PGCIL, the petitioner, sought approval for the transmission tariffs for its assets under the "Korba III Transmission System," benefiting primarily the Western Region states. The petition included prayers for approving trued-up tariffs for 2019-24 and new tariffs for 2024-29, along with allowances for various expenses such as Return on Equity (RoE) adjustments due to tax rate changes, petition filing fees, license and RLDC fees, and GST if applicable in the future.

The respondents in the case included major power distribution entities like Madhya Pradesh Power Management Company Limited ( MPPMCL ), Maharashtra State Electricity Distribution Company Limited (MSEDCL), Gujarat Urja Vikas Nigam Limited (GUVNL), and others. MPPMCL filed a reply raising concerns primarily on the grossing up of RoE with effective tax rates, GST implications, and sharing of transmission charges.

CERC's Analysis and Rulings

The Commission meticulously analyzed PGCIL's claims for truing up the Annual Fixed Charges (AFC) for the 2019-24 period, covering components such as Depreciation, Interest on Loan (IoL), Return on Equity (RoE), Interest on Working Capital (IWC), and Operation & Maintenance (O&M) Expenses.

Truing-Up for 2019-24 Period:

The CERC affirmed the capital cost and debt-equity ratio as previously determined. Key components were trued-up as follows:

> "The depreciation allowed for the transmission asset for the 2019-2024 tariff period is as follows: ... 1140.64 ₹ in lakh annually."

> "The trued-up IoL allowed in respect of the transmission asset is as follows: ... ranging from ₹ 510.69 lakh in 2019-20 to ₹ 106.00 lakh in 2023-24."

Regarding Return on Equity, CERC addressed MPPMCL 's concerns about grossing up based on actual taxes. The Commission clarified that for entities under the Minimum Alternate Tax (MAT) regime, notified MAT rates would be considered the effective tax rate for grossing up RoE.

> "Since the Petitioner has been paying the MAT rates of the respective financial year, the notified MAT rates for the respective financial year shall be considered as an effective tax rate for the purpose of grossing up the RoE for truing up of the 2019-24 tariff period..."

O&M expenses were approved as per the 2019 Tariff Regulations, and Interest on Working Capital was recalculated based on prevailing SBI MCLR rates.

Tariff Determination for 2024-29 Period:

For the 2024-29 tariff period, CERC determined fresh AFC based on the 2024 Tariff Regulations. Capital cost from 31.03.2024 was carried forward, and the debt-equity ratio was maintained. Depreciation was recalculated considering the asset's age and remaining useful life.

> "The depreciation allowed for the transmission asset under Regulation 33 of the 2024 Tariff Regulations for the 2024-29 tariff period, subject to truing up, is as under: ... ₹ 214.95 lakh annually."

IoL and RoE were calculated in line with the 2024 regulations, with RoE remaining consistent with the previous period, grossed up for tax. O&M expenses for this period were also determined using the new 2024 norms.

Ancillary Prayers and Other Directives:

CERC addressed other prayers from PGCIL, allowing for reimbursement of petition filing fees and publication expenses. It permitted PGCIL to recover license fees and RLDC charges separately from beneficiaries. The Commission also allowed for adjustments to Interest on Loan due to floating interest rates during the 2024-29 period.

Regarding security, insurance, and capital spares expenses, CERC allowed PGCIL to file separate petitions for claiming these costs. On GST, the Commission deemed the prayer premature, as GST is not currently levied on transmission services.

Finally, CERC directed that the billing, collection, and disbursement of transmission charges would be governed by the 2020 Sharing Regulations.

Final Order

The Commission concluded by approving the trued-up AFC for the 2019-24 period and determined the AFC for the 2024-29 period, subject to truing up, as detailed in the order. The order effectively disposes of Petition No. 223/TT/2025.

Approved Annual Fixed Charges (₹ in lakh):

Tariff Period 2019-24:

| Year | 2019-20 | 2020-21 | 2021-22 | 2022-23 | 2023-24 | |---------|-----------|-----------|-----------|-----------|-----------| | AFC | 3106.65 | 3007.57 | 2908.96 | 2813.75 | 2724.49 |

Tariff Period 2024-29 (Subject to Truing Up):

| Year | 2024-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 | |---------|-----------|-----------|-----------|-----------|-----------| | AFC | 1690.58 | 1681.55 | 1673.67 | 1675.32 | 1687.13 |

This order provides clarity and regulatory certainty for Power Grid 's operations in the Western Region and for the beneficiary entities dependent on the Korba III Transmission System.