Comments on draft cerc sharing of transmission charges and losses regulations 2019

Comments on CERC’s draft sharing of inter-State
Transmission Charges and Losses Regulations 2019
CERC's draft inter-State Transmission Charges and Losses Regulations proposes socialization
of expenditure of national interest with creation of cross subsidy against the present Tariff
Policy of government of India. Proposal of sharing of inter-State Yearly Transmission Charge
(YTC) of HVDC elements by postage stamp method is truly illogical. Even the CERC’s
Committee under I. S. Jha has observed that “different approach may be adopted for EHV-AC
system and HVDC system” [Ref. 6(c) of the Report of the Committee to draft regulations for
Sharing of ISTS charges under Member (I.S. Jha)]. In the present draft regulation 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. It is understood from Para 13 of the Jha Committee Report 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. Rest of the YTC will be shared by postage
stamp method allowing cross subsidy ignoring the fact that postage stamp method is suitable
for small area only. Given below some comments/suggestions/objections on CERC’s draft
sharing of inter-State transmission charges and losses regulations 2019:
Sl.No. Clause from draft regulation Comment/Suggestion/Objection
1 1. Short title, extent and
commencement
(1) These regulations may be called the
Central Electricity Regulatory
Commission (Sharing of Inter-State
Transmission Charges and Losses)
Regulations, 2019.
Instead of proposing amendment of the
existing regulations the draft proposes
a paradigm shift with the proposal of
reintroduction of postage stamp
method for some additional portion of
transmission elements against the
Tariff policy which suggests a tariff
mechanism to be sensitive to distance,
direction and quantum of power flow.
1.(1) is suggested to be named as
CERC (Sharing of inter-State
Transmission Charges and Losses)(7th
Amendment) Regulations 2010

2 2 (1) (f): ‘Designated ISTS Customer’ or
‘DIC’ means the user of any element(s) of
the Inter-State Transmission System
(ISTS) and shall include generating
station, State Transmission Utility,
Distribution Licensee including State
Electricity Board or its successor
company, Electricity Department of State,
Bulk Consumer and any other entity
directly connected to the ISTS and shall
further include any intra-State entity or
any trading licensee who has obtained
Medium Term Open Access or Long
Term Access to ISTS;
STU is neither a customer nor a user of
ISTS. Its intra-State status is similar to
CTU’s inter-State status. Therefore
‘STU’ is suggested to be omitted from
the definition of DIC.
3 2 (1) (m) ‘Peak block’ means the block in
which sum of net ISTS drawals by all
States is maximum during the month.
Since the peak is different all over
India, ‘Average Peak Block’ instead of
‘Peak Block’ is suggested.
4 3(2): The computation of share of
transmission charges for each DIC shall
be based on the technical and commercial
information provided by the DICs, inter-
State Transmission Licensees, NLDC,
RLDCs and SLDCs to the Implementing
Agency.
STU is suggested to be included in the
duty of providing technical and
commercial information of intra-State
system.
5 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
Electricity flows from sources to loads
through inter-State transmission
system following law of physics.
Sharing of charges for usage of that
system is necessary to be measured
rationally considering distance,

d. AC System Component (ACC). direction and quantum of power flow
as mandated in the Electricity Act
2003 and as framed in Govt. Tariff
Policy 2016. Segregation of
transmission components for sharing
of transmission charges as proposed in
the draft does not satisfy Govt. Tariff
Policy 2016. Therefore we object such
segregation and suggest application of
Hybrid Method for sharing of
transmission charges of the entire
inter-State Transmission Network as a
whole.
6 5(4) Transmission charges for the
National Component shall be shared by
the drawee DICs in the ratio of their
quantum of Long term Access plus
Medium Term Open Access.
5(5) Transmission charges for National
Component in respect of injecting DICs
with untied LTA capacity shall be shared
by such injecting DICs in the ratio of their
untied LTA capacity.
This proposal 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
parts of Uttar Pradesh. It is therefore,
unfair to socialize transmission
charges and losses over all
beneficiaries.”
Whereas this proposal advocates
postage stamp method on a large
geographical area violating Article 14
and Article 303(1) of the Constitution
of India. Therefore we suggest that
YTC of non-HVDC part may be
shared by Hybrid Method and YTC of
HVDC part may 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.
It will be prudent to find out ways to
recover a portion of National
Component-Renewable Energy from
PSDF in proportion to solar and wind
power transmission.
7 6 (2) Transmission charges covered under
sub-clause (a) of clause (1) of this
Regulation shall be shared by the Drawee
DICs in the ratio of their quantum of
Long Term
Access plus Medium Term Open Access.
6 (3) Transmission charges covered under
sub-clause (a) of clause (1) of this
Regulation in respect of injecting DICs
These proposals 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
proposals also advocate postage stamp
method on a large geographical area. It
will certainly create cross subsidy
among the transmission users violating

with untied LTA capacity, shall be shared
untied LTA capacity for the respective
target region.
sub-clause (b) of clause (1) of this
Regulation shall be shared by DICs of the
same region in the ratio of their quantum
of Long Term Access plus Medium Term
Open Access.
sub-clause (b) of clause (1) of this
Regulation, in respect of injecting DICs
with untied LTA capacity, shall be shared
untied LTA capacity for the respective
target region.
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
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
beneficiaries.” Therefore we suggest
that YTC of non-HVDC part may be
shared by Hybrid Method and YTC of
HVDC part may 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.

8 8 (5) Transmission charges covered under
AC-BC shall be apportioned to all drawee
DICs in the ratio of their quantum of
Long term Access plus Medium Term
Open Access
This proposal 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
proposal advocates postage stamp
method on a large geographical area. 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

beneficiaries.”
We therefore strongly object for such
sharing using postage stamp method
and advocate for Hybrid Method.
9 10 (1) All India Average Transmission
losses for ISTS shall be calculated by
Implementing Agency for each week,
from Monday to Sunday, as follows:
{(Sum of injection into the ISTS at
regional nodes for the week) minus (Sum
of drawal from the ISTS at regional nodes
for the week)}/ Sum of injection into the
ISTS at regional nodes for the week X
100 %
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
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 is desired
which only can satisfy Electricity Act
and Tariff Policy.
10 11(12)An Intra-State Transmission
System already certified by the respective
Regional Power Committees being used
for inter-State transmission of electricity
and for which tariff has already been
approved by the Commission, shall be
covered under these Regulations:
Provided that such intra-State
Transmission System shall be included
under these Regulations only for the tariff
period for which tariff has already been
11(12) is suggested to be modified as
below:
An Intra-State Transmission System
certified by the respective Regional
Power Committees for the sharing
period and for which tariff has already
been approved by the Commission,
shall be covered under these
Regulations:
Provided only the percentage of YTC
as per percentage of use of the lines as

approved by this Commission. ISTS determined by IA will be shared.
Provided also that suchintra-State
Transmission System shall be included
under these Regulations only for the
tariff period for which tariff has
already been approved by this
Commission.
11 13 (3) No transmission Charges shall be
levied for Inter-State transmission system
in respect of Short Term Open Access
transactions.
It is proposed that deviation shall be
calculated on actual injection /drawl
over LTA+MTOA of a DIC @ 1.2
times of the Transmission charges for
the State that means separate charges
for STOA shall not be collected from
entities having LTA or MTOA.
However they shall be charged
deviation bill. The contribution of an
embedded entity towards such
deviation shall be charged by State to
its embedded entity. This will
unnecessarily burden State. Therefore
transmission charge for STOA should
be levied in advance for embedded
customers having no LTA or MTOA
as per present practice.
12 21 (6) If a DIC does not provide the
required data, including injection or
drawal data for intra-State points within
stipulated time period, it shall be levied
an additional transmission charge @ 1%
of the transmission charges under the
First Bill for the month.
We suggest omitting proposed
regulation 21(6) since we find that
section 142 of the Electricity Act has
enough provision to cover the intent of
the proposition.
13 11. Transmission charges in specific
cases (1)-(12)
A new regulation 11. (13) is
suggested for inclusion as provided

below:
“Transmission line connecting two
States shall be exempted from RPC
certification of non-ISTS lines and
their YTC shall be shared with the
same principle as of non-ISTS Lines.”
14 Para 5.11 of Annexure-1
The transmission charge per circuit
kilometer for a transmission line for each
voltage level and conductor configuration
shall be made uniform. The methodology
followed shall be as follows:
This methodology is totally
unacceptable since it will create cross
subsidy among the users of ISTS
system against section 61(g) of the
Electricity Act. All actual YTC if
available is suggested to be
considered. For non-availability of
data prudent method is suggested to
be followed.
15 3. Principles of sharing transmission
charges
If a STU is obligated to import ‘Z’
MW ISGS power for DISCOMs, in
reality it
imports ‘X’ MW ISGS power through
different tie lines, transmits ‘Z’ MW
power to DISCOMs and injects X-
Z=Y MW power to ISTS through some
other tie lines. STU is not getting
transmission charge for Y MW power
transmission through intra-State
system. It is therefore prudent to
include a relevant portion of the ARR

of the STU with intra-State YTC and
share the same. Percentage of Y (said
above) in respect of total capacity of
STU may indicate the relevant portion
of ARR to be included.
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
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
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]
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.

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