Transmission Troubles

Private transmission companies have time and again raised concerns regarding the lack of a level-playing field in the segment. According to industry estimates, since the introduction of competitive bidding in 2011, of the 101 transmission projects identified for bidding, 47 have been awarded on a tariff- based competitive bidding TBCB basis, while 58 have been awarded through the cost-plus mechanism.

Recently, the newly constituted National Committee on Transmission (NCT) has recommended 21 schemes, worth nearly Rs 10 billion, under the regulated tariff mechanism (RTM) while only three were recommended to be developed through the TBCB route. Expectedly, this has upset private transmission developers and they have written to the Prime Minister’s Office expressing discontent. Industry bodies including ASSOCHAM and the Confederation of Indian Industry have also approached the Ministry of Power (MoP) raising concerns that such moves will disincentivise future investments by private players in the transmission segment. Power Line presents a round-up of the key developments in this matter…

NCT’s recommendations

To give a background, the NCT was constituted by the MoP in March 2017 in accordance with the guidelines for encouraging competition in the transmission segment. The committee is headed by the chairperson of the Central Electricity Authority (CEA) and has officials from the CEA, the MoP, NITI Aayog and the chief operating officer of Power Grid Corporation of India Limited (Powergrid) as members. The committee’s terms of reference include formulation of transmission schemes based on projects agreed upon by the regional standing committees on transmission, examination of the cost of schemes, recommendations on the mode of implementation – RTM or TBCB, formation of a bid evaluation committee, and determination of urgency of projects for RTM.

At its meeting held on July 27, 2018, NCT decided that the augmentation/modification works at existing interstate transmission system (ISTS) substations may be carried out by the owner of the substation and may not be awarded through TBCB. As per the minutes of the meeting, posted recently on the CEA website, NCT stated that providing access to the substation to a developer selected through TBCB for 25-35 years may have safety and security implications for the grid. Also, it may not be cost effective as the developer has to enter into an operations and maintenance (O&M) agreement with the existing owner of the substation for 25-35 years for carrying out the O&M of augmentation works. Also, there may be jurisdictional issues with regard to sharing of common facilities such as AC distribution board, DC distribution board and control room, which may jeopardise the augmentation work and lead to delays in power supply.

Based on these discussions, of the 26 ISTS schemes (worth Rs 21.5 billion) including the Indian portion of cross-border transmission projects, the majority (21 schemes) were recommended to be implemented by Powergrid. The three projects that were recommended to be developed through TBCB were – the 400 kV Udupi–Kasargode transmission line and a substation worth Rs 6.2 billion, the Western Region Strengthening Scheme- XIX (excluding augmentation of line bays at the existing ISTS substation to be implemented through RTM), and the North Eastern Region Strengthening Scheme-IX (excluding augmentation of line bays at the existing ISTS substation to be implemented through RTM). Two other schemes – limiting fault current level at 400 kV bus at the Farakka thermal power station and installation of 400/220 kV interconnecting transformer along with associated bays at Coastal Gujarat Power Limited’s switchyard – are proposed to be reviewed later.

Issues

Private transmission developers have sought reconstitution of the NCT to ensure a level-playing field and ensure that there is no potential conflict of interest. Further, they have claimed that the move to exempt augmentation/modification of existing substations from TBCB is against the principles of the Tariff Policy, 2016. It violates the NCT’s terms of reference and discourages competition in the transmission segment.

Given the growing influx of renewable energy in the grid, the need of the hour is to complete transmission projects in a timely and cost-effective manner. While Powergrid is the leading transmission utility and has remarkable project execution capabilities, industry experts believe that it must not be burdened with a pipeline of projects. Private developers have demonstrated impressive results in the past in the development of TBCB projects by delivering the projects on time, and even before time in some cases, and at tariffs 30-40 per cent lower than regulated tariffs. That said, they feel that there should be exemptions for the government to award the projects on a nomination basis, but these exemptions should be clearly specified and used in rare cases only, such as those pertaining to grid security. For now, the industry awaits the outcome of the policy decisions on these issues and hopes for a resolution of the concerns raised by private players.

Neha Bhatnagar

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