The Appellate Tribunal for Electricity in an important and far-reaching judgement has upheld and continued the practices of reallocation of bays at substations considering the vicinity/complex approach adopted by Central Transmission Utility of India Limited (CTU), until the Central Electricity Regulatory Commission (CERC) notifies the Regulation governing the field.

The issue involved related to the methodology and principles adopted by CTUIL on the aspects of how the reallocation of bays in a substation, which has become available on account of surrender/revocation by Grantees to existing Grantees of other substations or new applicants for connectivity adopting vicinity/Complex approach.

The above issue involved the interpretation of Regulations, namely, CERC (Grant of Connectivity, Long Term Access and Medium Term Access in Inter-State Transmission and Related Matters) 2009 [Connectivity Regulations] and CERC (Connectivity and General Network Access to the inter-State Transmission System) Regulations, 2022 [GNA Regulations] and the Detailed Procedure notified thereunder.

The Appeals filed by CTU and another Generator, namely, Project Nine Renewables challenged the order dated 19.01.2024 passed by CERC. The order dated 19.01.2024 was passed by CERC on Petitions filed by Generators- Eden Renewables seeking directions to be issued to CTUI for shifting of connectivity of their 300 MW Solar Power Project each from Fatehgarh-II Pooling Sub-Station (‘Fatehgarh-II PS’) to Fatehgarh-III Pooling Sub-Station (‘Fatehgarh-III PS’) or Bhadla II Pooling Sub-Station (‘Bhadla-II PS’) on account of the situation faced by Eden Bercy & Eden Passy regarding the requirement of underground dedicated transmission line from its Solar Power Projects to Fatehgarh II PS.

By order dated 19.01.2024, CERC held as under:

• CTU to stop the exercise of reallocation of bays holding that the re-allocation of bays was based on a criteria adopted on a case-to-case basis in a non-transparent and non-uniform basis;
• Issued the Practice Directions on which the reallocation exercise be conducted henceforth until appropriate amendments to the Regulations are issued;
• Reallocation carried out pursuant to minutes of meeting for reallocation meetings held on 20.06.2023 and 03.08.2023 or any subsequent reallocation meeting held for substations in Rajasthan be reconsidered in light of our observations

The Appellate Tribunal after critically analyzing the contentions of relevant parties including CERC set aside the order dated 19.01.2024 passed by CERC and directed that till the Regulations are amended, the existing practice of reallocation considering vicinity/complex approach adopted by CTU shall continue.

As regards the finding that CTU adopted a non-transparent approach in the reallocation exercise, the Appellate Tribunal held that the reallocation meetings were held in consultation with various other important stakeholders responsible for planning, development and operation of the electricity system, optimal utilization of resources including the development of renewable energy sources like CEA, SECI, Grid Controller of India, respective Load dispatch centres and therefore, the findings of non-transparent approach cannot be sustained. The Appellate Tribunal, however, agreed with the views of CERC regarding non-transparency as far as disclosure of procedure, Agenda and Minutes of such reallocation meetings on the website of CTU is concerned.

As regards the finding that CTU adopted a case to case approach in reallocation exercise, the Appellate Tribunal while disagreeing with the finding held that the process adopted by CTU has been followed since 2018 and Eden Renewables itself has been a beneficiary of the process and more importantly, apart from the Petition filed by Eden Renewables, there had been no complaint in regard to the process adopted by CTU.

As regards the Practice Directions issued by CERC, the Appellate Tribunal held that existing Regulations are fraught with the problems indicated by CTU. Further, it has been held that while the practice directions, according to CERC, has prospective application, it has the effect of unsettling some of the decisions taken in reallocation meetings/CMETS meetings on & prior to the date of the impugned order i.e. 19.01.2024, resulting in some decisions being re-opened.

In the present day energy management, the intersection of infrastructure development and technological innovation often presents complex legal challenges. Such was the case in the legal matter between POWERGRID (PGCIL), a leading entity in power transmission, and MPPMCL, a regulatory body tasked with safeguarding the interests of stakeholders.

Facts of the Case

The Petitioner- POWERGRID (PGCIL) filed a petition before the Central Electricity Regulatory Commission (Central Commission) under Section 17(3) of the Electricity Act, 2003 and Regulation 5(1)(b) of the Sharing of Revenue Regulations, seeking approval for the establishment of data centres at 15 of its substations on a lease/licence basis to its Wholly Owned Subsidiary (WOS) Company, Powergrid Teleservices Limited  (PTL) for undertaking Data Centre activities The primary objective is to optimise the use of transmission assets while adhering to regulatory requirements.

The case involves a complex interplay of regulatory compliance, related party transactions, and the commercial interests of long-term transmission customers. The Respondents had raised concerns regarding the legality of such arrangements and the potential impact on transmission operations. The Respondents contended that certain aspects of the proposed business model may contravene existing laws and regulations. Given the significance of this matter for both the petitioner and the respondent, the Commission has undertaken a thorough examination of the legal and factual issues involved. 

Contentions of the Parties

POWERGRID:

• POWERGRID, as the Petitioner, argued for the establishment of data centres at various substation locations
• It proposed a revenue-sharing model wherein the spare land or building at substations would be leased to its wholly-owned subsidiary (WOS) for data centre operations.
• The Petitioner emphasised its commitment to obtaining necessary approvals from relevant authorities, including State and Local Governments, 
• It was contended that the proposed revenue-sharing arrangement would adhere to corporate governance principles and transparency requirements.

MPPMCL:

• The Respondent(s) raised concerns regarding the classification of revenue earned by the WOS from the data centre business as revenue of POWERGRID. 
• The Respondent(s) questioned the utilisation of spare land at substations for non-transmission purposes, asserting that such activities could encumber transmission assets and compromise operational integrity. 
• The Respondent(s) underscored the importance of legal compliance and regulatory oversight in the establishment of data centres, particularly in obtaining approvals from state and local authorities and adhering to relevant provisions of the Electricity Act, 2003, and associated regulations.

Analysis and Decision

The analysis, rendered after thorough deliberation, encapsulated several pivotal points crucial for understanding the case’s outcome.

Firstly, the Central Commission classified revenue generated from data centre operations as related party transactions, thereby subjecting it to regulatory oversight in accordance with the provisions delineated in the Electricity Act, 2003. This classification underscored the regulatory scrutiny warranted by revenue streams associated with activities beyond the core function of transmission.

Secondly, the Central Commission stated the importance of compliance with regulatory frameworks, particularly emphasising the necessity for adherence to stipulations governing the sharing of revenue derived from non-transmission endeavours. 

In delineating the utilisation of spare land or buildings at substations for non-transmission purposes, such as data centre activities, the Central Commission firmly invoked Section 41 of the Electricity Act, 2003. Furthermore, it underscored the significance of obtaining requisite approvals from state and local authorities for non-transmission activities. 

Lastly, it stated its commitment to safeguarding the interests of end beneficiaries of transmission services. By emphasising the need to balance commercial imperatives with regulatory obligations, the Central Commission sought to uphold the integrity of the transmission ecosystem while fostering transparency and accountability associated with transmission substations.

Conclusion 

The order passed by the Central Commission concludes by approving the petitioner’s proposal to utilize spare land at various substations for establishing data centre facilities through its subsidiary, subject to specific conditions. It underscored the importance of complying with regulatory frameworks and ensuring transparency in related party transactions to safeguard the integrity of the transmission network. This decision not only allows for the exploration of additional revenue streams but also sets a precedent for similar cases, providing clarity on regulatory compliance and operational considerations regarding the utilization of spare land at substations for non-core activities.

The Central Electricity Regulatory Commission vide order dated 25.04.2024 has granted transmission line to Butwal-Gorakhpur Cross Border Power Transmission Limited (‘BGCPTL’), a joint venture between Powergrid Corporation of India Limited (‘PGCIL’) and Nepal Electricity Authority (‘NEA’) for implementation of Indian Portion of New Butwal – Gorakhpur 400 kV Double Circuit Cross Border Interconnection Transmission line and associated work.

As of present, there is only one high-capacity Muzaffarpur (India) – Dhalkebar (Nepal) cross-border link between India and Nepal. In case of an outage of this existing transmission line, it was predicted that Nepal would face grid disturbances and even a blackout. To prevent such a situation, and to supply secure and reliable power to Nepal, a second high-capacity transmission line is required.

Importantly, BGCPTL has been formed after approval of the Ministry of Power and NITI Aayog and has been nominated by the Government authorities of both India and Nepal to implement the transmission Project.

The Central Commission was of the view that BGCPTL does not fulfil any of the eligibility conditions for the grant of a transmission licence, however, considering the importance of the Transmission Project in promoting the exchange of power between India and Nepal and the policy decision of the Government, exercised its Power to Relax and granted license to BGCPTL for implementation of Indian portion of New Butwal- Gorakhpur 400 kV Double Circuit Cross-border interconnection transmission line.

This Project will strengthen the already existing Transmission System between India and Nepal and also reduce the risk of any outage or blackout in Nepal. This project will also play a key role in enhancing the relations between both the countries.