CERC on June 16, 2010 notified the Regulations of sharing inter-state transmission charges as per Electricity Act 2003. The method described in the Regulations is known as point of connection (PoC) transmission charges which is nothing but sharing of transmission charges as per projected usage.

1. Understanding Point of Connection
Transmission Charges in India
Amitava Nag
Additional Chief Engineer
Regulatory Affairs Cell, WBSETCL
Summery
National Electricity Policy and Tariff Policy mandate that national inter-state transmission tariff
frame work should be sensitive to distance, direction and quantum of flow. Accordingly, CERC
on June 16, 2010 notified the Regulations of sharing inter-state transmission charges. The
method described in the Regulations is known as point of connection (PoC) tariff. The point of
connection tariff calculation is based on hybrid method which uses marginal participation
method for nodal charges and average participation method for selection of slack buses.
NLDC has been designated as implementing agency for calculation of PoC charges. In this
method transmission charges are calculated for the transmission network owned, operated and
maintained by ISTS (inter-state transmission system) licensee and the transmission assets
certified by RPC used for transfer of inter-state power. The yearly transmission charges of ISTS
licensee are to be recovered fully.
It is based on the load flow results and the input data i.e. network topology, approved injection
and approved withdrawal data is obtained from each of the designated ISTS customer (DIC) and
transmission licensee. YTC (yearly transmission charges) data for each ISTS line is provided by
CTU / transmission licensees. The basic network data is truncated to have 132 kV and above
assets for NER while 400 kV and above assets for rest of country. This truncated network is
transported to Web net software developed by IIT, Mumbai, which calculates the transmission
charges for each node by using the hybrid method.
Average YTC per circuit km for each voltage and conductor configuration is calculated. The cost
is allocated to each transmission line by multiplying its ckt km with average cost for that voltage
level and conductor configurations. The nodal allocation of cost is done by adding the
proportionate cost of each of transmission line used by that node. Nodal cost so obtained is then
divided by approved injection / approved demand at that node to get PoC.
History of inter-State transmission charges in India
Upto 1991, the cost of transmission was clubbed with Generation Tariff. The transmission
charges were not known explicitly. From 1992 the transmission charges were apportioned on the
basis of energy drawn. The charges were known after-the-fact. From 2002, the transmission
charges were apportioned on the basis of MW entitlements which were called Regional Postage
Stamp Method.

2. Regional Postage Stamp method
This implies that all users of a system in a region pay the same price per MW of allocated
transmission capacity.
Difficulty in Regional Postage Stamp Method
(a) Transmission charges do not reflect network utilization.
(b) Difference between long-term and short- term transmission charges
(c) Does not satisfy NEP which indicates pricing based on distance, directional sensitivity and
quantum of power flow.
(d) Transfer of power from one region to another requires the party to pay charges for both the
region.
(e) Step down through ICT covered by beneficiary only.
New Approach
Point of Connection method (PoC) is a hybrid method based on load-flow study in which a
single charge is allocated as per location of the generator or load. Same principle is applied for
loss allocation also.
Purpose of new method
(i) Allocation of the ARR of the providers of the ISTS amongst various network users as per
national electricity policy.
(ii) Application of ISTS transmission losses to different users on their scheduled transactions
through ISTS.
Legal Support for new approach
(a) “Electricity Act 2003 is an Act to consolidate the laws relating to generation, transmission,
distribution, trading and use of electricity and generally for taking measures conducive to
…rationalization of electricity tariff…”–Objective of Electricity Act’2003 [Preamble of E Act]
(b) “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.”…[National
Electricity Policy Para 5.3.5]
(c) “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.
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.”…-
[Tariff Policy Para 7.2]
New features in new method
(a) Multiple generation zones in a state (but Single demand zone).
(b) Same rate for long-term, mid-term and short term open access.
(c) Deviation Charge for excess demand in a block above 20% @1.25 times of PoC charge, and
for excess demand in a block up to 20% @ of PoC charge rate.
(d) Zonal PoC for power exchange transaction.
(e) All the users will be default signatories to the Transmission Service Agreement (TSA)

3. Transition from old method to new method for sharing charges
(i) Initially 50% of total ARR by PoC method and rest 50% by postage stamp (uniform) method.
(ii) A new concept of “SLAB RATE” was introduced (3-slabs) for smooth transition to PoC
method of sharing of transmission charges
(ii) Presently, after the 3rd amendment, 90% of Total ARR is recovered by PoC method and 10%
of ARR by postage stamp (national) Method (defined as Reliability Charges). Slab has been
flattened from 3 (three) to 9 (nine).
Exemptions in the new sharing
No transmission charges or losses for solar (initially) & wind (in future) based Generations.
Development of PoC method
(a) Discussion paper on 'Approach for Sharing of Transmission Charges and Losses' on
12.2.2007 by CERC
(b) CERC Order dated 2.7.2007 and 28.3.2008 in Petition No. 85/2007
(c) Study by MARCADOS (consultant) for determining Transmission charges.
(d) Study by Mumbai IIT on losses.
(e)Staff paper ‘arranging Transmission for New Generating Stations, Captive power plants and
buyers of Electricity’ July 2008
(f) CERC’s approach paper in website on 15.5.09.
(g) CERC’s workshop in important metros.
(h) CERC’s public hearing on 29.7.2009
(i) CERC’s draft regulations on 9.2.10.
(j) Workshop to the stakeholders on 5.4.10.
(k) Public hearing on 13.4.10
(l) Discussed with of RPCs, SLDCs, CTU and NLDC.
(m) Signed regulation published on 15.06.10
(n) 1st amendment of PoC Regulations on 24.11.11
(o) 2nd amendment of PoC Regulations on 28.03.12
(p) 3rd amendment of PoC Regulations on 01.04.15
(q) 4th amendment of PoC Regulations on 03.07.15
(r ) 5th amendment of PoC Regulations on 14.12.17
Inspiration
The average participation and marginal participation method used in CERC Regulations is based
on views sent by Prof. Ignacio J. Pérez-Arriaga of Massachusetts Institute of Technology (MIT)
to FERC. [Ref. Para 13.13 of SOR of 3rd Amendment of Sharing Regulations.]
Mechanism for PoC
(i) Sharing shall be computed for an application period (presently quarterly) in advance subject
to periodic true-up.
(ii) PoC Transmission charge shall be Rs. per MW per hr on a monthly basis.

4. Assignment of sharing job
Initially NLDC is entrusted to do PoC for 2 yrs then an Implementing Agency will be designated
by CERC. NLDC shall develop detailed procedure Power Answer Lab (Bombay IIT) is entrusted
to tailor the software (MERCADOS is their consultant).
Objectives Addressed
i) Merit Order dispatch of generations does not get distorted due to defective transmission
pricing.
ii) Planned development/ augmentation of the transmission system does not get inhibited.
iii) Revenue of transmission system owner should not depend on dispatch decision and actual
power flows.
iv)Compatibility with the operations of energy markets.
v) Facilitate fair and transparent competition for case-1bids.
Media
The new mechanism will benefit the transmission network development and the users of the
transmission system, the release said. Under the new proposed mechanism, all the users will be
default signatories to the Transmission Service Agreement (TSA), which also requires these
users to pay the point of connection charge, which covers the revenue of transmission licensees.
This commercial arrangement would also facilitate financial closure of transmission investments,
the release said. At present the transmission investments are faced with the uncertainty in
generation. Also, the process of getting the bulk power transmission agreements (BPTAs) signed
by all the expected beneficiaries of the transmission system remains cumbersome. The new
regulation is also expected to facilitate integration of electricity markets and enhance open access
and competition by obviating the need for pan-caking of transmission charges. – domain-b.com
on 16.6.2010
Foreign experience
POC tariff is employed in the Nordic pool. The basic principle of POC tariff is that payment at
one point, the point of connection, gives access to the whole network system, and thus the whole
electricity market place. Those entities who take part in power market activities (generators,
loads), pay a single charge in $/MW towards network usage. This charge is decided by the
connection level of that particular entity. The POC tariff depends on the characteristics of the
individual seller or buyer. The distinguishing feature of POC tariff is that it can be applied to
power exchange (PX) trades as well as bilateral transactions between two parties.
The consumers or producers connected to a local network in Nordic Pool pay only to the owner
of that network. This payment allows them to trade electricity with any other player within the
entire national network system.
In Nordic pool, three levels of grids exist: Local grid, Regional grid and Main grid. The charge at
a local grid also embeds the charges of its next upstream grid i.e., the regional grid. The regional
grid in turn embeds charges of next upstream grid, i.e., the main grid. The advantage of the

5. scheme is that free trade across the region is possible and the transmission tariff does not become
a hurdle in the way of trade.
Shortcoming of PoC mechanism
There is provision in the PoC Regulations for the STUs to recover Yearly Transmission Charges
for inter-State lines which carry ISTS power flow subjected to the certification of RPCs. The
Hon’ble CERC vide order dated 12.05.2017 in Petition No. 07/SM/2017 directed STUs to file
tariff petition for those intra-State lines certified by RPCs. Further, the CERC has mentioned that
the Statement of Reason (SOR) dated 26.10.2015 of Sharing Regulations (Third Amendment)
provides as follows:-
“15.21 A question arises for consideration is whether to fix a minimum percentage figure to
consider a STU line as an ISTS line or not. As per Electricity Act and Tariff Policy, all lines
which are incidental to Inter-state flow of power are to be considered as ISTS. In a meshed
transmission system, many intra-State transmission lines carry inter-State power and therefore
become incidental to inter-State transmission system. However, as Electricity Grid is being
operated in a cooperative manner, for a minor fraction of ISTS power, it is expected that STU
would not insist on considering its line(s) to be inter - State as on the one hand it will receive
payment for its own lines, on the other it has to pay for usage of other States’ lines. If a STU puts
up a proposal for considering its line as ISTS and it is found that it is being utilized to a large
extent by its own drawee nodes, then it would be merely an academic exercise as major part of
tariff would be allocated to home State only. So keeping in view the regulatory process involved
in getting a line certified as carrying ISTS power, getting its tariff approved and then adjustment
from STU’s ARR, it is expected that this claim will be raised judiciously. An interesting situation
happened during 2011 when in Eastern and Northern Regions, many lines were submitted to
RPCs for approval as ISTS, Southern States realizing that they all are using each other State’s
line, decided that they will not put up any line for certification by RPC as ISTS. While
Commission wants to consider legitimate claims but this must not result in making process too
complex. The RPC may therefore uniformly decide a percentage below which (say 10%) such a
line would not be considered as an ISTS. Further, it is intended that for assessment of a
particular line being used for carrying inter-State power, technical knowhow and tools will be
provided by Secretariat of RPCs and NLDC/ RLDCs shall provide all necessary support to
States in this regard.”
But RPCs have not uniformly arrived yet to a methodology to certify those lines of STUs. In this
situation, if a STU is obligated to import ‘Z’ MW ISGS power for DISCOMs, in reality it
imports ‘X’ MW ISGS power

6. 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. Not only that, STU has not planned for the Y MW
power flow. Often congestion happening for this unplanned power transaction. It is therefore
prudent to find out a solution within the PoC mechanism to compensate the STUs for Y MW
transmission of power factoring congestion if any. This may in turn relieve the end consumers.
References
1. The Electricity Act 2003
2. The National Electricity Policy 2005
3. The Tariff Policy 2006
4. CERC’s Proposed Approach for
Sharing of Charges for and Losses in
ISTS dated 12.02.2007
5. CERC’s Approach Paper dated
15.05.2009 [Formulating Pricing
Methodology for inter-State
Transmission in India]
6. PoC Regulations dated 15.07.2010
7. SoR dated 11.06.2010
8. PoC 1st Amendment dated 24.11.11
9. PoC 2nd Amendment dated 28.03.12
10. PoC 3rd Amendment dated 01.04.15
11. PoC 4th Amendment dated 03.07.15
12. SOR of 3rd amendment dated
26.10.15
13. Explanatory Memorandum to draft
PoC 5th Amendment
14. PoC 5th amendment dated 14.12.17
15. CERC order dated 12.05.2017 in
Petition No. 07/SM/2017
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7. Annexure
Role of West Bengal in amending PoC
Regulations: An unnoticed effort
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