The Central Electricity Regulatory Commission (CERC) has issued draft regulations to determine fees and charges to be collected by Regional Load Despatch Centres (RLDCs) from the generating companies, distribution companies (DISCOMs), bulk consumers, inter-state transmission licensees, buyers, sellers and inter-state trading licensees, settlement nodal agency and any other users.

The proposed regulations are named Central Electricity Regulatory Commission (Fees and Charges of Regional Load Despatch Center and other related matters) Regulations, 2024.

Stakeholders can submit their comments and suggestions by May 6, 2024.

Registration Process

Users intending to access the grid must sign up with their RLDC at least 30 days before using it. When new units or parts of the transmission system are added, the company must inform the RLDC 30 days before these additions start operating.

Power exchanges and trading licensees must register with the National Load Dispatch Center (NLDC) 30 days before using the services.

Upon application, auto-generated acknowledgment for receipt of the application will be issued by the concerned RLDC or NLDC. After scrutiny, the concerned RLDC or NLDC may inform the applicant of any deficiencies in the application within one week. The applicant must rectify the deficiency within one week, after which the application will be closed.

The RLDC or NLDC, after scrutinizing registration applications and being satisfied with the correctness of the information furnished in the application, must register the applicant and send a written intimation to the applicant.

RLDCs or NLDCs will then maintain a list of registered users on their website and their registration date.

RLDCs or NLDCs can cancel a user’s registration after giving at least a month’s notice if the user (i) loses their connection, (ii) their Grid Network Access ends, or (iii) they fail to pay the required fees for over 120 days past the due date. If the user resolves these issues, they can apply for registration again.

Registered entities that experience a change in name or legal status after registration must notify the relevant RLDC or NLDC. They should provide supporting documents from an appropriate authority, like the Registrar of Companies, the National Company Law Tribunal, or any other court. The RLDC or NLDC will verify these documents and update their records to reflect the change within 30 days of receiving the information.

Registration Fees

DISCOMs, bulk consumers, and inter-state transmission licensees must pay a one-time registration fee of ₹1.5 million (~$18,032) upon applying for grid access.

Generating companies:

• Up to 10 MW installed capacity: ₹75,000 (~$901)
• More than 10 MW and up to 100 MW: ₹150,000 (~$1,803)
• More than 100 MW and up to 500 MW: ₹750,000 (~$9,016)
• More than 500 MW and up to 1000 MW: ₹1 million (~$12,021)
• More than 1000 MW: ₹1.5 million (~$18,032)

Interstate trading licensees, renewable power park developers, qualified coordinating agencies, SNA, sellers, and buyers must pay a one-time registration fee of ₹15,000 (~$180) along with the scheduling application.

Power exchanges must pay a one-time registration fee of ₹3 million (~$36,065) to NLDC.

Functions of RLDC and NLDC 

The functions of the Despatch Center include Market Operation and System Operation functions.

The Market Operation function involves:

• Assisting new entities in accessing the grid.
• Administering open access.
• Finalizing inter-change schedules for energy accounting.
• Managing Day Ahead Market and Term Ahead Market.
• Overseeing Real-Time Market and Ancillary Services Market.
• Managing interface energy metering.

Registry Function under programs like renewable energy certificate, perform, achieve, trade, and others as directed by the Commission or Government of India.

System operation function includes:

• Operational planning, scheduling, and dispatch on a day-ahead and real-time basis.
• Analysis after dispatch.
• Dissemination of information.
• Any other tasks assigned to RLDCs or NLDC by the Act, Regulations, or Commission orders.

Capital Expenditure

The CAPEX plan outlines the capital expenditure undertaken during the control period, encompassing various vital areas. This includes upgrading and expanding infrastructure, modernizing existing assets, and adopting state-of-the-art IT and communication systems to enhance operational efficiency and cybersecurity.

Additionally, the plan incorporates provisions for disaster recovery control centers, civil structure construction and renovation, and procurement of necessary infrastructure facilities. It also accounts for installing new assets or replacing existing ones prematurely due to legal changes or unforeseen circumstances, subject to regulatory approval.

Furthermore, the plan addresses liabilities arising from arbitration awards or compliance mandates from statutory authorities or court orders.

RLDCs and NLDCs must provide the Commission with details regarding replacing existing assets. This includes information such as the proposed date of replacement, cumulative depreciation recovered up to that date, cumulative loan repayment, and writing off the gross value of the original assets from the fixed assets. Additionally, they must outline the estimated expenditure and completion period for each replacement program.

Consolidated CAPEX programs are managed as follows: CAPEX involving both NLDC and RLDCs will be included in NLDC’s plan, while CAPEX involving one or more RLDCs will be separated and included in the respective RLDC’s plan.

Any CAPEX needed during the control period due to unforeseen events like force majeure or changes in laws, directives from the Commission, or other authorities not included in the initial CAPEX plan will be considered during the true-up process. However, if the extra capital expenditure exceeds 20% of the approved capital expenditure for the control period, a separate request can be submitted during that period.

Determination of fees

The annual LDC charges for 2019-2024 will be adjusted according to Regulation 13 of the Central Electricity Regulatory Commission (Fees and Charges of RLDC and NLDC) Regulations, 2019.

From this adjustment, the capital cost approved by March 31, 2024, will be the starting point for calculating the opening capital cost on April 1, 2024, for determining the annual LDC charges for 2024-2029.

The NLDC, including the Corporate Centre and all RLDCs, must submit a petition within 180 days of notification of these regulations.

It should include the capital expenditure incurred and certified by the auditor as of March 31, 2024, as well as projections for the expenditure during 2024-2029 based on the CAPEX plan.

The annual LDC charges for 2019-2024 will be reviewed according to Regulation 13 of the Central Electricity Regulatory Commission (Fees and Charges of RLDC and NLDC) Regulations, 2019. As of March 31, 2024, the capital cost will be used as the starting point for calculating the annual LDC charges for the control period 2024-2029.

To determine the charges for 2024-2029, the NLDC will file a petition within 180 days from the date of notification of the regulations. This petition, submitted on behalf of NLDC and all RLDCs, will be based on the capital expenditure incurred by March 31, 2024, and the projected spending for the control period 2024-2029, as outlined in the CAPEX plan. Before filing the petition, the NLDC must share it with users and post it on its website to invite public comments. The Commission will consider any feedback received within 60 days.

After hearing from all relevant parties, the Commission will issue an order determining the fees and charges. During the petition process, RLDCs will continue billing users based on fees approved by the Commission until March 31, 2024. After the control period ends, provisional billing will continue based on fees approved by the Commission until March 31, 2024. The Commission will separately determine fees and charges for each RLDC and NLDC.

The annual NLDC charges, including Corporate Centre expenses, will be distributed among RLDCs based on the GNA of the drawee DICs in each region as of March 31, 2024.

Truing up of annual charges

NLDC must submit a petition by October 31, 2029, on behalf of RLDCs and NLDC (including Corporate Centre) for conducting a truing-up exercise after the control period ends. This petition should include details of capital expenditures, sources of financing, operation and maintenance expenses, and any other incurred costs from April 1, 2024, to March 31, 2029, duly audited and certified by the auditor.

The Commission will conduct the truing-up exercise along with the application for determining fees and charges for the next control period based on the admitted expenditures up to March 31, 2029. RLDCs and NLDCs will perform annual reconciliation and provisional truing-up of their expenses, refunding any excess fees collected to users by September 30 of the following year.

If necessary, a mid-term review of expenses may be conducted within the control period, with NLDC filing a mid-term true-up Petition before the Commission.

Any amount under-recovered or over-recovered by RLDCs, including NLDC charges, will be refunded or recovered from users in six equal monthly installments, along with simple interest equal to the Reference Rate of Interest as of April 1 of the respective year until the Commission’s order issuance date.

Computation of Capital Cost

After careful review, the Commission will use the capital cost approved to determine the annual LDC charges for RLDCs and NLDCs.

This cost will be calculated by considering several factors: the approved capital cost as of March 31, 2024, excluding any liabilities; additional capitalization expenses as per Regulation 14(1); depreciation of replaced fixed assets as per Regulation 14(2); interest during construction and related expenses approved by the Commission; and excluding grants received from the government or statutory bodies without repayment obligations from the capital cost calculations.

The admitted capital cost will undergo a prudence check, examining the reasonableness of various factors such as capital expenditure, financing plan, interest during construction, incidental expenses during construction, financing charges, foreign exchange rate variations, cost overruns, and time overruns. Interest during construction will be calculated based on actual and normative loans, with norms applied to cases where equity infusion exceeds 30% of total funds deployed. Incidental expenses during construction will be computed from project commencement, considering pre-operative costs and any revenue earned during construction will reduce these expenses.

If project delays are not the RLDC’s or NLDC’s fault, interest during construction and incidental expenses during the delayed period may be allowed after a prudence check, with any liquidated damages recovered from contractors adjusted in the RLDC’s or NLDC’s capital cost. RLDCs and NLDC will submit Auditor and Management Certificates for capital expenditure incurred as of March 31, 2024, and projected expenditure for the control period 2024-29, respectively.

After reviewing their prudence, the Commission may approve capital expenditure for existing or additional assets planned during the tariff period. If assets are de-capitalized, their original cost will be subtracted from the gross fixed asset value, and the corresponding loan and equity will be deducted from the outstanding loan and equity in the year of de-capitalization. Adjustments will also be made to cumulative depreciation and loan repayments, considering the year of capitalization.

Debt-equity ratio

The debt-equity ratio for Regional Load Despatch Centres and National Load Despatch Centres is determined based on various factors. The actual ratio admitted by the Commission until March 31, 2024, is considered for the beginning of the control period 2024-2029. The Commission will set it according to regulations for expenditures incurred before April 1, 2024, where the ratio hasn’t been determined.

From April 1, 2024, the ratio is set at 70% debt and 30% equity. The excess is treated as a normative loan if the actual equity deployed exceeds 30%. However, if the actual equity is less than 30%, it determines the return on equity.

Any foreign currency investments are converted into Indian rupees. Grants received for projects are not considered part of the debt-equity ratio. Premiums raised by Grid-India for share capital and internal resources used for project funding are included in paid-up capital only if they’re utilized for capital expenditure.

Fees and charges structure

Charges include Load Despatch Centre (LDC) Fees for grid access registration and other services and Annual LDC Charges (ALC) for power scheduling. ALC includes RLDC charges, NLDC charges (including Corporate Centre expenses), and performance incentives for RLDCs and NLDCs.

RLDC charges include return on equity, interest on loan capital, depreciation, operation and maintenance expenses, human resource expenses, and interest on working capital. NLDC charges are computed using the following methods, including expenses for the Corporate Centre approved by the Commission.

All NLDC and Corporate Centre expenses are distributed to Regional Load Despatch Centres based on their respective Grid Network Availability (GNA). Additionally, performance-linked incentives, approved by the Commission, are applied in addition to Annual RLDC charges.

Computation of annual LDC charges

Return on equity is computed at a pre-tax rate of 15.5%, adjusted according to the effective tax rate of the relevant financial year as per the Finance Act. This adjustment is done by grossing up the base rate with the effective tax rate. Considering the applicable tax rate for Grid-India, the actual return on equity is adjusted at the end of the control period.

Depreciation

The asset’s salvage value (excluding IT equipment and software) will be considered 10%, and depreciation will be allowed up to a maximum of 90% of the capital cost of the asset. The salvage value for IT equipment and software will be considered NIL, and 100% of the assets’ value will be considered depreciable.

Land is not a depreciable asset, and its cost shall be excluded from the capital cost while computing the depreciable value of the capital cost of the asset.

The value of the assets not in use or declared obsolete should be removed from the capital cost to calculate depreciation.

Operation and Maintenance Expenses

Operation and maintenance allowed for 2023-2024 will be escalated by 5.25% yearly to arrive at permissible operation and maintenance expenses for each year of the control period 2024-2029.

Human resource expenses

Human resource expenses allowed for 2023-2024 will be escalated by 5.25% yearly to arrive at a permissible human resource expense for each year of the control period 2024-2029.

Any significant human resource expenses envisaged during the control period 2024-29 due to additional manpower wage revision will be allowed separately after the prudence check.

LDC Development Fund

The Grid-India will maintain a separate fund called ‘Load Despatch Centre Development Fund (LDCD Fund)’ for the purposes specified in this Regulation.

The charges from return on equity, interest on loan, depreciation, registration fees, Charges for scheduling under T-GNA, REC Charges, PAT Charges, and interest earned on the LDCD Fund shall be deposited into the LDCD Fund after meeting the statutory tax requirements.

The RLDC and NLDC shall be entitled to utilize the money deposited in the LDCD Fund for the creation of new assets, loan repayment, servicing of the interest and dividend payment restricted to 15.50% of paid-up capital, meeting equity portion for new assets, margin money for raising loan from the financial institutions and payment towards purchase consideration for acquisition ventures subject to the approval of the Commission.

Performance-Linked Incentive

Each RLDC and NLDC can recoup an incentive equivalent to 12% of their Annual LDC Charges if they achieve a performance level of 90% against the Key Performance Indicators for the previous year ending on March 31.

This incentive will increase proportionally by 1% of annual LDC charges for every 5% improvement in performance above 90%. Conversely, the incentive will decrease by 1% for every 3% drop in performance below 90%, also proportionally.

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