Envisage 22% of the daily revenue requirement for a bus is shared among the passengers on the basis of distance traveled and rest is allocated uniformly without considering distance traveled. Application of national postage stamp method for sharing of transmission charges and losses bears similar logic. These regulations can be challenged in High Court under Article 226 of the Constitution of India.

1. Page 1 of 10
Comments on CERC (sharing of inter-State
Transmission Charges and Losses) Regulations 2020
Amitava Nag
I would request you to think of a Hotel-chain which has hotels in Shillong,
Kolkata, Bangalore, Mumbai and New Delhi. If they charge room rent of all
their hotels in five locations at equal rate on square feet basis ignoring the
intrinsic value of each of the hotels separately, would you agree with that
method? Imagine a uniform charge for airport pick-up/drop for all hotels
irrespective of the distances of the airports from the hotels. Envisage 22% of the
daily revenue requirement for a bus is shared among the passengers on the basis
of distance traveled and rest is allocated uniformly without considering distance
traveled. Application of national postage stamp method for sharing of
transmission charges and losses bears similar logic. CERC's inter-State
Transmission Charges and Losses Regulations will make socialization of
expenditure of national interest with creation of cross subsidy against present
Tariff Policy. It also proposes socialization of Transmission Losses irrespective
of actual occurrence. It is understood from Para 13 of the Jha Committee Report
submitted to CERC that merely 22% of the total YTC is proposed to be shared
by hybrid method which measures sensitivity of distance, direction and
quantum of power flow. From two RTI petitions we came to know that around
64% of the YTC (8% NC-HVDC, 1% NC-RE & 55% AC-BC) will be shared
by National Postage Stamp Method ignoring the fact that postage stamp method
is suitable for small area only. YTC of HVDC part is not proposed to be shared
among the beneficiaries in proportion of the benefits they derive from its
presence as per causer pays principle applied in existing Sharing Regulations
2010. Attached a few comments on the newly enacted regulations:

2. Page 2 of 10
Sl.No. enacted regulation Comment
1 4. Components of transmission charges
Transmission charges for each DIC shall
have the following components:
a. National Component(NC);
b. Regional Component (RC);
c. Transformers Component (TC); and
d. AC System Component (ACC).
One of the main causes of enacting
Electricity Act 2003 is “rationalization
of electricity tariff” noted in the
preamble of the said Act. Electricity
flows from sources to loads through
inter-State transmission system
following law of physics. Sharing of
transmission charges rationally for
usage of that system is necessary to be
measured considering distance,
direction and quantum of power flow
as documented in Tariff Policy 2016.
Segregation of transmission
components for sharing of
transmission charges in the newly
enacted regulations does not satisfy
Tariff Policy 2016. Section 25 under
PART- V of the Electricity Act
mandates that- “For the purposes of
this Part, the Central Government
may, make region wise demarcation of
the country, and, from time to time,
make such modifications therein as it
may consider necessary for the
efficient, economical and integrated
transmission and supply of electricity,
and in particular to facilitate voluntary
inter-connections and co-ordination of
facilities for the inter-State, regional
and inter-regional generation and
transmission of electricity.” Central
Government has created five regions
and no amendment to this demarcation
is made yet. The proposal also violates
section 61(i) and section 178(1) of the
Electricity Act 2003. Therefore such

3. Page 3 of 10
segregation does not make any sense
and application of Hybrid Method for
sharing of transmission charges of the
entire inter-State Transmission
Network of India as a whole with
causer pays principle for HVDC is
required.
2 5(4) The Yearly Transmission Charges
for the National Component shall be
shared by all drawee DICs and injecting
DICs with untied LTA in proportion to
their quantum of Long Term Access plus
Medium Term Open Access and untied
LTA respectively.
This regulation is against section 61(g)
and section 61(i) of Electricity Act,
Para 5.3.5 of National Electricity
Policy and Para 7.1(2) of Tariff Policy.
It will create cross subsidy among the
transmission users. It has been
recorded in the Point 8 of Chapter 20
(Page 20) of Annual Report for 2009-
10 of CERC that postage stamp
method is suitable for small area only.
In Para 3.3 of page II-9 of CERC’s
Approach Paper on Formulating
Pricing Methodology For Inter-State
Transmission in India 2009 it is written
that “Postage stamp method is more
suited when the geographical area in
consideration / the electrical network
is relatively small, flows are simple
and do not cause large externalities
(parallel flows) for intervening /
electrically contiguous regions and
priority is accorded to simplicity and
social acceptability over economic
efficiency.” In Para 3.6 of the same
paper it is written that “Postage stamp
methodology does not reflect
utilization of the network. Eastern
parts of Uttar Pradesh are close to
large power plants and use
transmission resources and cause
transmission losses to a lesser extent
as compared to Punjab or even eastern

4. Page 4 of 10
parts of Uttar Pradesh. It is therefore,
unfair to socialize transmission
charges and losses over all
beneficiaries.”
Whereas this regulation advocates
postage stamp method on a large
geographical area violating Article 14
and Article 303(1) of the Constitution
of India. Therefore YTC of non-
HVDC part is necessary to be shared
by Hybrid Method and YTC of HVDC
part is necessary to be shared among
the beneficiaries in proportion of the
benefits they derive from its presence
as per causer pays principle applied in
existing Hybrid Method.
3 6(2) Yearly Transmission Charges
covered under sub-clause (a) of Clause (1)
of this Regulation shall be shared by
drawee DICs of the receiving region and
injecting DICs with untied LTA in the
receiving region, in proportion to their
quantum of Long Term Access plus
Medium Term Open Access and untied
LTA, respectively.
6(3) Yearly Transmission Charges
covered under sub-clause (b) of Clause
(1) of this Regulation shall be shared by
drawee DICs of the region and injecting
DICs (with untied LTA) of the same
region, in proportion to their quantum of
Long Term Access plus Medium Term
Open Access and untied LTA,
respectively.
These regulations are also against
section 61(g) and section 61(i) of
Electricity Act and against Para 5.3.5
of National Electricity Policy and Para
7.1(2) of Tariff Policy. These
regulations also advocate postage
stamp method on a large geographical
area. It will certainly create cross
subsidy among the transmission users
violating Article 14 and Article 303(1)
of the Constitution of India. It has been
recorded in the Point 8 of Chapter 20
(Page 20) of Annual Report for 2009-
10 of CERC that postage stamp
method is suitable for small area only.
In Para 3.3 of page II-9 of CERC’s
Approach Paper on Formulating
Pricing Methodology For Inter-State
Transmission In India 2009 it is
written that “Postage stamp method is
more suited when the geographical
area in consideration / the electrical

5. Page 5 of 10
network is relatively small, flows are
simple and do not cause large
externalities (parallel flows) for
intervening / electrically contiguous
regions and priority is accorded to
simplicity and social acceptability over
economic efficiency.” In Para 3.6 of
the same paper it is written that
“Postage stamp methodology does not
reflect utilization of the network.
Eastern parts of Uttar Pradesh are
close to large power plants and use
transmission resources and cause
transmission losses to a lesser extent
as compared to Punjab or even eastern
parts of Uttar Pradesh. It is therefore,
unfair to socialize transmission
charges and losses over all
beneficiaries.” Therefore YTC of non-
HVDC part is necessary to be shared
by Hybrid Method and YTC of HVDC
part is necessary to be shared among
the beneficiaries in proportion of the
benefits they derive from its presence
as per causer pays principle applied in
existing Hybrid Method.
4 8 (5) Transmission charges under AC-BC
shall be shared by all drawee DICs and
injecting DICs with untied LTA in
proportion to their quantum of Long Term
Access plus Medium Term Open Access
and untied LTA respectively.
This regulation is also against section
61(g) and section 61(i) of Electricity
Act and against Para 5.3.5 of National
Electricity Policy and Para 7.1(2) of
Tariff Policy. It will create cross
subsidy among the transmission users
violating Article 14 and Article 303(1)
of the Constitution of India. This
regulation advocates postage stamp
method on a large geographical area. It
has been recorded in the Point 8 of

6. Page 6 of 10
Chapter 20 (Page 20) of Annual Report
for 2009-10 of CERC that postage
stamp method is suitable for small area
only. In Para 3.3 of page II-9 of
CERC’s Approach Paper on
Formulating Pricing Methodology For
Inter-State Transmission In India 2009
it is written that “Postage stamp
method is more suited when the
geographical area in consideration /
the electrical network is relatively
small, flows are simple and do not
cause large externalities (parallel
flows) for intervening / electrically
contiguous regions and priority is
accorded to simplicity and social
acceptability over economic
efficiency.” In Para 3.6 of the same
paper it is written that “Postage stamp
methodology does not reflect
utilization of the network. Eastern
parts of Uttar Pradesh are close to
large power plants and use
transmission resources and cause
transmission losses to a lesser extent
as compared to Punjab or even eastern
parts of Uttar Pradesh. It is therefore,
unfair to socialize transmission
charges and losses over all
beneficiaries.” Therefore such sharing
is necessary to be done by Hybrid
Method.
5 10 (1) Transmission losses for ISTS shall
be calculated on all India average basis by
the Implementing Agency for each week,
from Monday to Sunday, as under:
[(In – Dr) / (Ir)] X 100
Where:
‘In’ denotes sum of injection into the
When CERC is piloting SCED and
thinking to introduce MBED of ISGS
Generations at that time proposal of
sharing of losses in National Postage
Stamp Method is contradictory and
certainly against the concept of
economic operation specified in

7. Page 7 of 10
ISTS at regional nodes for the week;
‘Dr’ denotes sum of drawal from the ISTS
at regional nodes for the week;
‘Ir’ denotes sum of injection into the ISTS
at regional nodes less injection from
projects covered under Clause (1) of
Regulation 13 of these regulations
for the week.
section 28(3)((e) of the E Act. In Para
7.2 of Tariff Policy it is stated that
“Transactions should be charged on
the basis of average losses arrived at
after appropriately considering the
distance and directional sensitivity, as
applicable to relevant voltage level, on
the transmission system.” Therefore,
location wise loss allocation only can
satisfy Electricity Act and Tariff
Policy.
References
The Constitution of India
Article 14 Equality before law.—The State shall not deny to any person
equality before the law or the equal protection of the laws within the
territory of India.
Article 302 Parliament may by law impose such restrictions on the freedom
of trade, commerce or intercourse between one State and another or within
any part of the territory of India as may be required in the public interest.
Article 303 (1) Notwithstanding anything in article 302, neither Parliament
nor the Legislature of a State shall have power to make any law giving, or
authorising the giving of, any preference to one State over another, or
making, or authorising the making of, any discrimination between one State
and another, by virtue of any entry relating to trade and commerce in any of
the Lists in the Seventh Schedule.
Electricity Act 2003
Section 61(i) (Tariff regulations): The Appropriate Commission shall,
subject to the provisions of this Act, specify the terms and conditions for the

8. Page 8 of 10
determination of tariff, and in doing so, shall be guided by the National
Electricity Policy and tariff policy.
Section 61(g) (Tariff regulations): The Appropriate Commission shall,
subject to the provisions of this Act, specify the terms and conditions for the
determination of tariff, and in doing so, shall be guided that the tariff
progressively reflects the cost of supply of electricity and also, reduces
cross-subsidies in the manner specified by the Appropriate Commission;
Section 28(3)(e) The Regional Load Despatch Centre shall be responsible
for carrying out real time operations for grid control and despatch of
electricity within the region through secure and economic operation of the
regional grid in accordance with the Grid Standards and the Grid Code.
National Electricity Policy 2005, MoP, GoI
5.3.5 “A national transmission tariff framework needs to be implemented by
CERC. The tariff mechanism would be sensitive to distance, direction and
related to quantum of flow.”
Tariff Policy 2016, MoP, GoI
7.1 (2) The National Electricity Policy mandates that the national tariff
framework implemented should be sensitive to distance, direction and
related to quantum of power flow. This has been developed by CERC taking
into consideration the advice of the CEA. Sharing of transmission charges
shall be done in accordance with such tariff mechanism as amended from
time to time.
7.1 (3) Transmission charges, under this framework, can be determined on
MW per circuit kilometer basis, zonal postage stamp basis, or some other
pragmatic variant, the ultimate objective being to get the transmission
system users to share the total transmission cost in proportion to their
respective utilization of the transmission system. The ‘utilization’ factor
should duly capture the advantage of reliability reaped by all. The spread
between minimum and maximum transmission rates should be such as not

9. Page 9 of 10
to inhibit planned development/augmentation of the transmission system
but should discourage non-optimal transmission investment.
7.2 (1) Transactions are being charged on the basis of average losses
arrived at after appropriately considering the distance and directional
sensitivity, as applicable to relevant voltage level, on the transmission
system. Based on the methodology laid down by the CERC in this regard for
inter-state transmission, the SERCs may evolve a similar framework for
intra-state transmission. The loss framework should ensure that the loss
compensation is reasonable and linked to applicable technical loss
benchmarks. The benchmarks may be determined by the Appropriate
Commission after considering advice of CEA.
7.2 (2) It would be desirable to move to a system of loss compensation
based on incremental losses as present deficiencies in transmission
capacities are overcome through network expansion. The Appropriate
Commission may require necessary studies to be conducted to establish the
allowable level of system loss for the network configuration and the capital
expenditure required to augment the transmission system and reduce
system losses. Since additional flows above a level of line loading lead to
significantly higher losses, CTU/STU should ensure upgrading of transmission
systems to avoid the situations of overloading. The Appropriate Commission
should permit adequate capital investments in new assets for upgrading the
transmission system.
CERC’s Annual Report 2009-10
It has been recorded in the Point 8 of Chapter 20 (Page 20) of Annual Report
for 2009-10 of CERC that postage stamp method is suitable for small area
only.
CERC’s Approach Paper on Formulating Pricing Methodology for
inter-State Transmission in India 2009
Postage stamp method is more suited when the geographical area in
consideration / the electrical network is relatively small, flows are simple and
do not cause large externalities (parallel flows) for intervening / electrically
contiguous regions and priority is accorded to simplicity and social
acceptability over economic efficiency. [Para 3.3 of page II-9]

10. Page 10 of 10
In a large region the usage is not uniform: Postage stamp methodology
does not reflect utilization of the network. Eastern parts of Uttar Pradesh are
close to large power plants and use transmission resources and cause
transmission losses to a lesser extent as compared to Punjab or even
eastern parts of Uttar Pradesh. It is therefore, unfair to socialize
transmission charges and losses over all beneficiaries. [Para 3.6 of page II-
13]
Regional Postage Stamp Method have been successfully used till now,
but with the formation of the national grid, may no longer meet the
efficiency requirements of transmission pricing. [Table #6]
Report of CERC Task Force to Review Framework of PoC Charges
2019
Para 4.8.6: Solar and wind based generations which are getting
commissioned by a particular date have been given the advantage of not
paying the inter-state transmission charges and inter-state transmission
losses for the period of 25 years from the date of commercial operation. This
waiver has been granted not through an ‘explicit‘subsidy infusion into
transmission but through an element of cross-subsidizing one set of users by
another as the transmission licensees are assured their full return.