APTEL Rules In Favour of PGCIL On Cost Overruns

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In an important ruling, the Appellate Tribunal for Electricity (APTEL) has ruled in favour of Power Grid Corporation of India Limited (PGCIL) on the issue of additional costs incurred due to time overruns on setting up transmission infrastructure.

PGCIL had suffered a setback on the matter after the Central Electricity Regulatory Commission (CERC), on a plea by various discoms (whose cases were bunched together for this judgement) had ruled that in relation to the payment of Incidental Expenses During Construction (IEDC) on account of time over-run allowed, considered  as being beyond the control of the transmission company (PGCIL) would be limited to 10.75% / 5% / 2.95% of the
hard cost (RCE) respectively.

PGCIL had raised a grievance against this limitation, arguing that once time overruns were accepted due to reasons beyond the control of PGCIL, it did not make sense to limit cost escalations for the same projects. It further complained that there was no perusal, no discussions regarding the submission made by PGCIL giving the detailed justification element-wise regarding the IEDC during time over-run.

The Appellate Tribunal for Electricity (APTEL) bench agreed with the PGCIL plea, and  directed that the “impugned orders passed by Central Electricity Regulatory Commission are hereby set aside to the extent challenged in the Appeal. The matter is remitted back to the Central Electricity Regulatory Commission with a direction to allow IEDC in accordance with the Tariff Regulations. No order as to costs.”

Appellate Tribunal for Electricity (APTEL) also clarified that with this judgment the express provision given in Regulation 11 of Tariff Regulation 2014 of the CERC, there is absolute clarity in regard to the fact that the payment of IEDC on account of time over-run having been granted by the CERC is to be done as per actuals after prudence check by the CERC. The Central Commission should therefore examine all these justifications given by the Transmission Company or generating company in regard to the IEDC on account of time over-run as per the tariffs of the Tariff Regulation 2014 and should not cap it at normative value of 10.75% / 5% / 2.95% of the hard cost (RCE).

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