Tribunal Upholds Defaulter Pays Principle: Powergrid Wins TANTRANSCO Appeal

On 11.12.2024, the Hon’ble Appellate Tribunal for Electricity (Appellate Tribunal) pronounced Judgement in the matter between Tamil Nadu Transmission Corporation Limited (TANTRANSCO) and Power Grid Corporation of India (POWERGRID) wherein it has upheld the Defaulter Pays Principle with respect to the transmission charges. TANTRANSCO has been made liable to pay 50% of the transmission charges to POWERGRID for the period from 01.04.2014 till 28.02.2019 due to its delay in commissioning the line bays necessary for evacuating power from the Kalpakkam PFBR (500 MW) Project (KPFBR Project) proposed to be set up by the Generating Station – Bhartiya Nabhikiya Vidyut Nigam Limited (BHAVINI). While doing so, the Hon’ble Tribunal has also re-affirmed the settled position that true proceedings are not the stage to reconsider de-novo principles of tariff determination.

In the 20th Standing Committee Meeting (SCM) on Power System Planning in Southern Region, POWERGRID was entrusted with the responsibility of constructing transmission assets for evacuation of power from the KPFBR Project.

POWERGRID had filed a petition before the Central Commission for the determination of tariff for the said assets for the period from 2009 to 2014 under the CERC Tariff Regulations, 2009. Vide its Order dated 29.04.2015, the Central Commission determined the tariff for two assets (Asset 1 and 2). However, the tariff was not granted with respect to the third asset (Asset 3) as it was not put to beneficial use due to the non-commissioning of the KPFBR Project as well as the bays under TANTRANSCO’s scope.

Aggrieved by the said Order, POWERGRID filed an appeal before the Hon’ble Appellate Tribunal. Vide Order dated 20.09.2018, the Hon’ble Tribunal partly allowed the said appeal granting liberty to POWERGRID to approach the Central Commission for seeking determination of tariff with respect to Asset 3.

Consequently, POWERGRID filed another petition before the Central Commission for the declaration of COD of Asset 3 as 01.04.2014 under the CERC Tariff Regulations, 2014 and approval of its transmission tariff for the 2014-19 period. Vide Order dated 04.03.2021, the Central Commission approved the COD of Asset 3 as 01.04.2014 and held TANTRANSCO and BHAVINI liable to pay the transmission charges in equal proportion from the approved COD. The above Order dated 04.03.2021 was not challenged by either party.

Subsequently, on 21.08.2021, POWERGRID filed the true-up petition for the transmission tariff for the 2014-19 period. The Central Commission disposed of the said Petition vide Order dated 05.12.2022. With regard to the sharing of transmission charges for Asset 3, the Central Commission reaffirmed its earlier decision dated 04.03.2021 and reiterated that the same shall be shared by TANTRANSCO and BHAVINI in equal proportion from 01.04.2014 till 28.02.2019 and thereafter, tariff from 01.03.2019 to be recovered from the BHAVINI till the commissioning of its first unit of generation.

Thus, the primary questions of law before the Hon’ble Appellate Tribunal were:

1. Whether during the stage of true-up, the Central Commission ought to have re-considered the principles for tariff determination already finalised during the stage of tariff determination?
2. Whether TANTRANSCO’s liability to pay the transmission charges in the absence of specific provisions under the Tariff Regulations, 2014 and the Sharing Regulations, 2010, could have been levied by the Central Commission?
3. Whether in the absence of commissioning of generator, non-commissioning of bays at Kanchipuram is of no consequence because Asset III cannot be put to regular use even if bays were commissioned in the absence of generator?

POWERGRID apprised that in the present Appeal, its commercial operation date and consequently its right to receive the yearly transmission charges is not under challenge.

POWERGRID emphasised the present Appeal is arising only out of the True-Up proceedings, however, the actual determination of tariff specifically the imposition of liability in respect of Asset III was levied in terms of the Order of the Central Commission dated 04.03.2021. The Order dated 04.03.2021 has remained unchallenged by either party and therefore attained finality.

The issues already decided in the said Order, including TANTRANSCO’s liability to pay transmission charges with respect to Asset 3, cannot be reopened by challenging the true up Order dated 05.12.2022. POWERGRID clarified that the “truing-up” process only adjusts initial estimates with actual figures and does not reconsider the basic principles of tariff determination. [ref.BSES Rajdhani Power Ltd. v. Delhi Electricity Regulatory Commission, (2023) 4 SCC 788]

POWERGRID further distinguished the judgement in Power Grid Corporation of India Limited v. Punjab State Power Corporation Limited, (2016) 4 SCC797 (Barh Balia Case) as relied upon by TANTRANSCO as the issue before the Hon’ble Supreme Court in the aforesaid matter was not whether the defaulting party can be made liable to pay transmission charges but if such liability can be imposed on the beneficiaries without any actual power flow through the concerned asset.

Furthermore, in regard to the reliance placed by TANTRANSCO on the judgement of the Hon’ble Supreme Court in UPPCL v. NTPC, (2009) 6 SCC 235, POWERGRID emphasized that even though in the said matter, the Hon’ble Supreme Court observed that the principles of Res Judicata are inapplicable to tariff proceedings, it also further observed that same issues cannot be allowed to be reagitated after the matter has progressed through multiple stages.

Additionally, POWERGRID emphasized that Regulation 8(6) of the Sharing Regulations, 2010 and the proviso to Regulation 12(2) of the CERC Tariff Regulations, 2014 do not address situations where a generating company alone has delayed in fulfilling its obligations. In absence of specific provisions, the Central Commission can duly exercise its regulatory powers under the Tariff Regulations, 2014 for considering the approval of the Commercial Operation Date.

The Hon’ble Tribunal while appreciating the submissions of POWERGRID held that the decision of the Hon’ble Supreme Court in the Barh Balia Caseis inapplicable to the present case. Upholding the Central Commission’s Order, the Hon’ble Tribunal held that TANTRANSCO, a defaulting party and not a beneficiary, is liable for 50% of the transmission charges for Asset 3. This aligns with the Supreme Court’s principle that transmission charges cannot be imposed without actual power flow on beneficiaries.

The Hon’ble Tribunal further observed that the non-commissioning of bays at Kanchipuram by TANTRANSCO is not immaterial, even if the associated KPFBR Project was not ready. The Hon’ble Tribunal upheld the observations made by the Central Commission in this regard that as both BHAVINI and TANTRANSCO were at fault as far as regular use of Asset 3 is concerned, the liability to pay its transmission charges after approval of its COD should also be on both the parties.

Further, while rejecting TANTRANSCO’s contention that its liability to pay 50% transmission charges is contrary to the Sharing Regulations, 2010 and the CERC Tariff Regulations, 2014, the Hon’ble Tribunal has held that there is no stipulation in the said Regulations regarding the party which shall bear the liability to pay transmission charges when there is a combined default by both the generator and the transmission licensee. Therefore, the Central Commission was competent in determining the liabilities in this regard by utilising its regulatory powers. Reliance was placed upon the judgement dated 18.01.2019 passed by the Hon’ble Tribunal in Nuclear Power Corporation of India Limited(Supra) wherein it was observed that “the Central Commission is the decision-making authority under Section 79(1) of the Act and such decision making or taking steps/measures under the said Section of the Act is not dependent upon making of regulations under Section 178 of the Act.”

It was further observed that the Hon’ble Supreme Court in BSES Judgment (Supra) has held that the rules/methodology used in the initial tariff determination cannot be altered at the stage of true up by changing the basic principles, premises and issues involved in the initial projection of ARR. Therefore, it is impermissible to change the methodology of sharing the transmission charges for Asset 3 during the true-up stage.

Based on the above findings, the Hon’ble Tribunal has upheld the findings of the Central Commission and dismissed the Appeal filed by TANTRANSCO vide Order dated 11.12.2024.

This judgment provides a significant precedent in ensuring accountability within the power sector by upholding the Defaulter Pays Principle and reaffirming that settled principles in tariff determination cannot be revisited during true-up proceedings. It also reinforces the Central Commission’s authority to address the regulatory vacuum tariffs while fostering discipline among stakeholders to avoid project delays and inefficiencies.