New charging method for electricity transmission

The Central Electricity Regulatory Commission (CERC) recently notified the CERC (Sharing of Inter State Transmission Charges and Losses) Regulations, 2010, which comes into effect from January 2011. Under the regulations, a new method for determination of transmission charges for the national grid, namely, point of connection (PoC) method has been introduced, to gradually replace the prevailing regional postage stamp (RPS) method. The PoC method will require existing transmission service agreements to be realigned in line with the regulations, thereby affecting certain vital areas like cash flow management and payment security mechanism.

PoC v RPS

Under the RPS method, transmission charges and losses are shared on a regional pooled basis by all states in a particular region, based on the proportion of power drawn through the inter-state transmission system (ISTS). A state or utility situated in one region, buying power from another region, has to bear the proportionate transmission charges and losses of such region, regardless of the distance and direction of power flow.

The PoC method aims to distribute the cost of the entire transmission system among its users (designated ISTS customers or DICs), in proportion to their respective utilization of the transmission system. DICs include generating companies, state transmission utilities (STU) and any other customer connected to the high tension national grid. The PoC method takes into account the distance and direction of power flow, while calculating charges for DICs.

Sakya Singha Chaudhuri is a counsel in the Delhi office of Trilegal where Aditya Kapoor is an associate. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.