2026 Supreme(Online)(CERC) 209

CENTRAL ELECTRICITY REGULATORY COMMISSION
Ramesh Babu V., Member, Harish Dudani, Member
Power Grid Corporation of India Limited – Appellant
Versus
Uttar Pradesh Power Corporation Limited – Respondent
Petition No. 501/TT/2025

ACE allowed for replacing critical obsolete substation equipment under Reg.25(2)(c) if grid stability at risk, subject to true-up; <₹20 lakh items via O&M depreciation spread over balance life or 10 yrs (higher).

Headnote:(A) Electricity Act, 2003 - Sections 62, 79(1)(d) - Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019 - Regulations 19, 25(2)(a), 25(2)(c), 18, 32, 33, 34, 36 - Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2024 - Regulations 19(3), 24, 25(2), 18(3), 33(8), 32, 36(3)(a) - Transmission tariff truing-up for 2019-24 period and determination for 2024-29 period for combined assets of transmission system associated with hydroelectric project - Capital cost trued-up at ₹23606.75 lakh as on 31.3.2024 - Actual additional capital expenditure allowed for replacement of substation equipment (circuit breakers, isolators, surge arresters, power/control cables) under Regulation 25(2)(c) of 2019 Regulations after excluding illumination costs - For 2024-29, opening capital cost adopted as trued-up value; ACE allowed for replacement of current transformers, capacitive voltage transformers, bushings, DG set, firefighting equipment due to obsolescence/ageing impacting grid stability, subject to prudence check and true-up; ACE not allowed for battery chargers (<₹20 lakh) to be met from O&M expenses; Depreciation on ACE spread over balance useful life or 10 years (higher); Debt-equity ratio as previously admitted; RoE grossed-up using MAT rates; O&M per norms; IWC at SBI MCLR + spread - Annual fixed charges approved with detailed year-wise computations. (Paras 9-136)

(B) Tariff Regulations - Additional Capitalisation - Proviso to Regulation 25(2) - Replacement of obsolete equipment costing <₹20 lakh per item not capitalisable, to be covered under normative O&M expenses.

(C) Tariff Regulations - Depreciation - Regulation 33(8) - For ACE near useful life completion, depreciation spread equally over balance useful life or 10 years (whichever higher for transmission assets), subject to prudence check and life extension justification. (Paras 99-105)

Facts of the case:
Petition filed by transmission licensee for truing-up tariff of 2019-24 period under 2019 Regulations and determination for 2024-29 under 2024 Regulations for transmission system (400/220 kV lines and substation) operational since 1.4.1997. Claimed actual ACE for equipment replacement due to ageing/obsolescence; projected ACE for further replacements. No objections from respondents or public.

Findings of Court:
Trued-up capital cost ₹23606.75 lakh (31.3.2024); net ACE 2019-24: ₹342.54 lakh (2022-23), ₹307.60 lakh (2023-24); AFC trued-up year-wise (e.g., 2023-24 total ₹3040.37 lakh). For 2024-29, ACE allowed ₹136.33 lakh (2024-25 spillover) + fresh ₹876.84 lakh (equipment replacements, adjusted); DG set capped at ₹25 lakh; total AFC year-wise (e.g., 2024-25 total ₹2947.19 lakh). Allowed separate recovery for filing fees, CTUIL expenses, license/RLDC fees; GST/Tax adjustments permitted.

Issues: Admissibility of actual/projected ACE for equipment replacements under obsolescence provisions; treatment of low-value replacements; depreciation methodology for ACE; computation of debt-equity, RoE, O&M, IWC; spillover adjustments.

Ratio Decidendi: Replacement of critical aged/obsolete substation equipment justified as ACE under Regulation 25(2)(c) where failure risks grid stability/reliability, subject to segregation, de-capitalisation, prudence check, true-up; low-value (<₹20 lakh) items via O&M depreciation per specified timelines; tariff components computed normatively with trued-up inputs.

Result: Petition allowed; tariffs trued-up/approved as detailed; recoveries per sharing regulations.

Table of Content
1. petition for truing-up and tariff determination (Para 1 , 2 , 3 , 4)
2. procedural history and hearing (Para 5 , 6 , 7 , 8)
3. trued-up capital cost approval (Para 9 , 10 , 11 , 12 , 13 , 14)
4. ace for equipment replacement allowed (Para 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24)
5. de-capitalisation approved (Para 25 , 26 , 27)
6. net ace and final capital cost (Para 28 , 29 , 30)
7. debt-equity ratio and depreciation norms (Para 31 , 32 , 34)
8. interest on loan computation (Para 35 , 36 , 37)
9. mat-based roe grossing-up (Para 38 , 39 , 40 , 41 , 42)
10. o&m expenses normative approval (Para 43 , 44 , 45 , 46)
11. trued-up afc for 2019-24 (Para 47 , 48 , 49 , 50 , 51)
12. opening capital cost for 2024-29 (Para 52 , 53 , 54 , 55 , 56)
13. spill-over ace allowed (Para 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67)
14. equipment replacement under reg 25(2) (Para 68 , 69 , 70 , 71 , 72 , 73 , 74)

ORDER

The instant Petition has been filed by Power Grid Corporation of India Limited (PGCIL) (hereinafter referred to as “the Petitioner”), a deemed transmission licensee for the truing up of the transmission tariff for the 2019-24 tariff period under the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019 (hereinafter referred to as “the 2019 Tariff Regulations”), and for the determination of the transmission tariff for the 2024-29 tariff period under the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2024 (hereinafter referred to as “the 2024 Tariff Regulations”) in respect of the Combined Assets (comprising the Existing System and New Equipment) (hereinafter referred to as “Combined Assets”) for the Transmission System associated with the URI Hydroelectric Project (4x120 MW) in the Northern Region (hereinafter referred to as the “transmission system”).

2. The Petitioner has made the following prayers in the instant petition:

a) “Approve the trued-up Transmission Tariff for 2019-24 block and transmission tariff for

2024-29 block for the asset covered under this petition, as per para 13 & 14 above.

b) Admit the capital cost claimed, and additional capitalization incurred during 2019-24 and projected to be incurred during 2024-29.

c) Allow the petitioner to recover the shortfall or refund the excess Annual Fixed Charges, on account of Return on Equity due to change in applicable Minimum Alternate/Corporate Income Tax rate as per the Income Tax Act, 1961 (as amended from time to time) of the respective financial year directly without making any application before the Commission as provided in Tariff Regulations, 2019 and Tariff Regulations, 2024 as per para 13 & 14 above for respective block.

Further it is submitted that deferred tax liability before 01.04.2009 shall be recoverable from the beneficiaries or long term customers / DIC as the case may be, as and when the same is materialized as per Regulation 67 of Tariff regulations, 2019 and Regulation 89 of Tariff regulations, 2024. The petitioner may be allowed to recover the deferred tax liability materialized directly without making any application before the Hon’ble Commission as provided in the regulations.

d) Approve the reimbursement of expenditure by the beneficiaries towards petition filing fee, and expenditure on publishing of notices in newspapers in terms of Regulation 94 (1) Central Electricity Regulatory Commission (Terms and Conditions of Tariff)

Regulations, 2024, and other expenditure (if any) in relation to the filing of petition.

e) Allow the petitioner to bill and recover RLDC fees & charges and Licensee fee, separately from the respondents in terms of Regulation 94 (3) and (4) Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2024.

f) Allow the petitioner to bill and adjust impact on Interest on Loan due to change in Interest rate on account of floating rate of interest applicable during 2024-29 period, if any, from the respondents.

g) Allow

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