The Appellate Tribunal for Electricity (APTEL) has ruled that POWERGRID Southern Interconnector Transmission System (PSITSL) entitled to an extension of 289 days for the completion of a transmission project, acknowledging that the delay was due to “force majeure” events.

The Central Electricity Regulatory Commission (CERC) has been instructed to pass a fresh order, considering the appellate authority’s observations. The Commission has been given two months to complete this process.

Background

PSITSL, a subsidiary of the Power Grid Corporation of India (PGCIL), was established to execute a critical transmission project involving constructing multiple transmission elements across various regions. PSITSL entered a Transmission Service Agreement (TSA) with several long-term transmission customers to facilitate the project.

However, the project encountered numerous challenges, leading to delays and cost overruns. PSITSL attributed these delays to several force majeure events, including severe right-of-way issues due to changes in land compensation policies in Andhra Pradesh, which delayed the project by 853 days.

PSITSL also argued that legal changes during the project’s execution increased costs. The cost of acquiring the Special Purpose Vehicle (SPV) for the project rose due to modifications made by the Bid Process Coordinator (BPC). The introduction of the Goods and Services Tax (GST) in 2017 altered the tax structure, leading to higher overall project costs.

Furthermore, new land compensation policies in Andhra Pradesh and Karnataka required higher payments for land acquisition, further escalating costs. Additional payments were also necessary to secure National Tiger Conservation Authority clearances. These legal changes and delays significantly increased the project’s cost, including funding and overhead expenses.

Due to these challenges, PSITSL could not complete the project on time. It sought a 289-day extension from the Central Electricity Regulatory Commission (CERC), citing Force Majeure events and legal changes as reasons beyond its control.

Additionally, PSITSL requested approval for a ₹4.88 billion (~$58.17 million) increase in project costs, attributing the rise to these challenges. The company proposed a 7.75% increase in annual non-escalable charges—fixed fees agreed upon for transmission services—to offset the increased costs. PSITSL also requested reimbursement for expenses related to filing and pursuing their petition.

CERC rejected PSITSL’s claim that the delays were due to force majeure events. However, the Commission recognized that PSITSL was entitled to some relief under the “Change in Law” provision. Specifically, PSITSL was granted ₹1.22 million (~$14,544) due to an increase in the acquisition price of the SPV, as this increase was acknowledged as a result of legal changes after the initial agreement.

Regarding the additional expenditure due to GST implementation, the Commission stated that this claim would only be admissible if PSITSL could provide relevant documents proving a direct correlation between the items purchased and the GST levied on them, supported by invoices and a certificate from an auditor.

PSITSL also claimed additional land compensation costs due to new policies in Andhra Pradesh and Karnataka. The Commission allowed PSITSL to claim compensation under the Change in Law provision for the notification issued by the Andhra Pradesh government. However, this compensation must be adjusted by deducting any amounts previously fixed by state authorities in similar cases before the policy change.

The Commission rejected the claims related to additional compensation in Karnataka, claims about obtaining wildlife clearances, and claims related to financing and overhead costs.

Additionally, the Commission directed that any transmission charges received by PSITSL from Long-Term Transmission Customers or beneficiaries from the project’s declared Commercial Operation Date (COD) until the COD approved by the Commission must be returned.

The Central Transmission Utility (CTU)/PGCIL was also directed to raise bills on PSITSL to recover these charges and adjust future bills accordingly.

Tribunal’s Analysis

Following these unfavorable rulings, PSITSL appealed the decision to APTEL. The petitioner claimed the delays were partly due to a Change in Law event, which increased the project cost. The petitioner sought to increase the non-escalable charges by 7.75% to account for this cost increase.

APTEL acknowledged that the issuance of the guidelines on October 15, 2015, and their adoption by the State Government on June 20, 2017, constituted a Change in Law event under Article 12.1.1 of the TSA. Since these guidelines were a mandatory direction by a government instrumentality, they qualify as a Change in Law event.

The petitioner was, therefore, entitled to appropriate compensation under the TSA due to the impact of this Change in Law event. The impact of this event on the project’s cost must be accounted for, and the petitioner is entitled to an increase in non-scalable transmission charges as per the provisions of the TSA.

PSITSL claimed that the project cost increased by ₹4.88 billion (~$58.17 million) due to various events. The increase in the acquisition price of SPV amounted to ₹1.22 million (~$14,544). Notification of GST Laws resulted in an increase of ₹614.4 million (~$7.32 million), including the associated overheads and funding costs.

Notification of Land Compensation for Tower Base and Transmission Line Corridor by State Governments (Andhra Pradesh and Karnataka) led to an increase of ₹1.82 billion (~$21.69 million) in Andhra Pradesh and ₹1.98 billion (~$23.6 milllion) in Karnataka, with further associated costs. Additional Payment for Wildlife Clearance from NTCA was also raised.

CERC allowed claims related to the increase in the acquisition price and the impact of GST. The claim regarding land compensation was partially allowed. The compensation was accepted for land in Andhra Pradesh but denied for land in Karnataka. The claim regarding additional payments for wildlife clearance was rejected.

APTEL upheld CERC’s findings and decisions, rejecting the petitioner’s claims for additional compensation related to the wildlife clearance and land compensation in Karnataka. APTEL ruled that while some costs were validly claimed under this provision, others were not, primarily because they were foreseeable or existing obligations that the petitioner should have accounted for before submitting their bid for the project.

PSITSL claimed additional costs incurred due to delays in the commissioning of certain elements of the transmission project. These are costs related to the interest and financial expenses incurred due to the delay in project completion, amounting to ₹1.75 billion (~$20.86 million). It also claimed Overhead Costs about general and administrative expenses that continued accumulating during the delay, amounting to ₹5.3 million (~$63,186).

CERC had rejected the petitioner’s claim. The primary reason for this rejection was that the Commission did not recognize the delay caused by a force majeure event. Upon review, the appellate authority found that the petitioner’s claim deserved reconsideration. The appellate authority ordered the Commission to re-examine the petitioner’s claim in light of its decision.

APTEL ruled that the petitioner is entitled to an extension of 289 days for the completion of the project and instructed CERC to pass a fresh order, considering the appellate authority’s observations.

Recently, the Ministry of Power issued new guidelines addressing the payment of right-of-way compensation for transmission lines, including those in urban areas.

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