CERC Finalizes Transmission Tariff for PGCIL's Bhiwadi Substation for the 2019-2029 Tariff Block - 2026-06-06

CERC Finalizes Transmission Tariff for PGCIL's Bhiwadi Substation for the 2019-2029 Tariff Block

The Central Electricity Regulatory Commission (CERC) has issued a significant order in Petition No. 580/TT/2025, effectively concluding the regulatory process for the truing up of transmission tariffs for the 2019-24 period and the determination of tariffs for the 2024-29 block regarding the 400/220 kV Bhiwadi Substation. The decision, handed down by a bench comprising Shri Ramesh Babu V. and Shri Harish Dudani, provides clarity on the financial parameters governing this critical Northern Region transmission asset.

The Fiscal Roadmap for Bhiwadi

The petition, filed by the Power Grid Corporation of India Limited (PGCIL), sought approval for the trued-up Annual Fixed Charges (AFC) for the 2019-24 cycle and fixed tariffs for the upcoming 2024-29 cycle. The Commission’s order meticulously evaluates the capital cost, debt-equity ratios, depreciation, and interest on working capital as mandated under the 2019 and 2024 Tariff Regulations. For the 2019-24 tariff period, the trued-up AFC has been settled at ₹1133.77 lakh for 2019-20, escalating to ₹1171.79 lakh by 2023-24, ensuring a balanced recovery of costs associated with the transmission asset.

Navigating Asset Lifespan and Obsolescence

A core point of contention involved the additional capital expenditure (ACE) claimed by PGCIL for the 2024-29 period. PGCIL proposed replacing aging, obsolete equipment—including pneumatic circuit breakers, porcelain CTs, and CVTs—citing technical obsolescence and safety concerns as these assets approach or surpass their 25-year service life.

The Commission applied a strict prudence check, filtering these claims through the lens of Regulation 25 of the 2024 Tariff Regulations. While the Commission allowed the replacement of critical primary assets (CBs, CTs, CVTs, and Bushings) under the "obsolescence of technology" provision, it took a firm stance on other claims:

> "The cost of the individual item is less than ₹20 lakh and the same is not allowable as ACE and the Petitioner shall meet this through normative O&M Expenses."

Consequently, requests for retrofitting auxiliary systems, battery chargers, and general AC upgrades were denied under capital costs, shifting the burden for these smaller maintenance items to the utility’s normative Operations and Maintenance (O&M) budget.

The Balancing Act of Operational Excellence

The order also paves the path for separate regulatory treatment of emergent costs. Notably, the Commission acknowledged the current regulatory gap regarding Central Transmission Utility of India Limited (CTUIL) fees, permitting PGCIL to recover these as additional O&M expenses in a separate petition. Similarly, a singular, consolidated petition window has been opened for PGCIL to aggregate security, insurance, and large capital spare claims, promoting administrative efficiency.

Key Observations

The judgment is marked by meticulous adherence to regulatory norms. Key observations include:

• On Life-Extension Necessity: "We are of the view that these equipment are aged and their replacement is critical and as such their failure may affect the stability and reliability of the Grid."
• On the Threshold for Capitalization: "Any ACE with respect to the replacement of assets under the original scope on account of the obsolescence of technology of less than ₹20 lakh shall not be considered as part of the capital cost."
• On Firefighting Renovations: "The Petitioner is carrying out renovation work... not replacing the entire [system]. Therefore, we are of the view that the expenditure towards this does not fall under the capital nature."

Implications and Next Steps

The CERC’s ruling provides PGCIL with the necessary regulatory sanction to prioritize grid safety by replacing obsolete hardware while reinforcing fiscal discipline on minor maintenance. The decision ensures that only major, prudence-checked infrastructure renewals increase the tariff base, while routine operational repairs remain within the designated O&M limits. This precedent underscores the Commission's role in balancing infrastructure modernization with the consumer's interest in stable, predictable electricity transmission pricing.