The lines were built for two power projects. One was abandoned, the other gave capacity back, and the bill was spread across everyone
Virender Bhat and Ajay Talegaonkar upheld pooled recovery of transmission charges for assets at Tuticorin, finding the lines carry far more than the long-term access they were challenged over.
Transmission lines were planned and built to carry power out of two private generating stations at Tuticorin. One of those projects was abandoned before it generated anything; the other took long-term access for only 558 MW and later sought to give part of that back. Tamil Nadu's distribution utility argued it should not be made to pay a share of the cost of lines built for generators that never materialised. The Appellate Tribunal for Electricity has dismissed its appeals, holding that the assets form part of a meshed network and are carrying far more than the 558 MW the argument assumed — while telling the regulator its reasoning for saying so was too thin.
The market and the conduct
Power Grid Corporation built the transmission assets and filed the tariff petitions. The Central Electricity Regulatory Commission determined tariff for them by orders of 19 September 2017 and 21 November 2017, fixing dates of commercial operation of 13 November 2016 and 23 October 2016 and directing that the charges be recovered through the point of connection mechanism — the pooled arrangement under which all designated users of the interstate system share transmission costs rather than being billed bilaterally for particular lines.
The scheme had been planned around generation that did not arrive as expected. Coastal Energen commissioned its first unit in December 2014 and built its dedicated evacuation line only on 29 July 2016. Ind-Barath told the joint coordination committee in May 2015 that its first unit was expected in March 2017, pushed that to June 2018 at the October 2015 meeting, first indicated it was abandoning the project in June 2016 and confirmed the abandonment in September 2016. Coastal Energen sought to relinquish part of its long-term access capacity after the transmission assets had already been commissioned.
TANGEDCO's two appeals, filed in 2018, raised two questions: whether the assets validly achieved commercial operation under the 2014 tariff regulations, and whether their charges could be recovered through the pooled mechanism at all.
What each side wanted
TANGEDCO asked for a declaration that commercial operation had not validly been achieved for want of intended beneficial use, with the transmission charge liability for the untied long-term access remaining on the generators that defaulted rather than falling on existing designated users. An artificial date of commercial operation, it argued, cannot be used to impose pooled liability on distribution companies, and it relied on an order of September 2025 in two 2017 appeals for the proposition that a designated user cannot be made to pay for an asset from which it derives no corresponding benefit.
Power Grid's answer had several strands. The assets were completed in accordance with the tariff regulations. TANGEDCO's own admitted drawal of 558 MW from Coastal Energen runs through the system in question. Coastal Energen commissioned on 23 December 2014 and its dedicated line only on 29 October 2016, and in the meantime it supplied TANGEDCO through this asset under medium-term open access. Coastal Energen's charges are recovered under the connectivity regulations of 2009, and Ind-Barath's construction bank guarantee was encashed when its project was delayed.
The generator-side liability is not being ignored, merely litigated elsewhere. Coastal Energen's relinquishment of 542 MW of long-term access was recognised by an interim order of 1 March 2018, and relinquishment charges were determined in a separate petition on 9 March 2019. That determination is itself under appeal, tagged with twenty-four similar appeals, and an order of 8 October 2020 directed that invoices not be raised while they are pending, except in insolvency-related cases.
On the network point Power Grid was specific about where the electricity actually goes. Coastal Energen's power flows from the Tuticorin Pooling Station through the disputed asset to the new Salem Pooling Station and on to the existing Salem substation, from which it is dispersed across the grid. The assets form part of a common meshed interstate network serving multiple users and are not dedicated to the two independent power producers, so pooled recovery is what the sharing regulations contemplate — and loading the whole charge onto the producers while TANGEDCO uses the asset would not be sustainable.
The regulatory test
On commercial operation, the utility's case was that the technical certificates relied on — from the regional load despatch centre and the Central Electricity Authority — do not by themselves satisfy the tariff regulations, because a transmission asset attains commercial operation only when it is put to its intended beneficial use. With one generating project never commissioned, the other holding access for only 558 MW, no external beneficiaries identified and the planned connectivity incomplete, the assets could not be treated as operational for the purpose they were built for. A designated user, it argued, cannot be saddled with charges for an asset from which it derives no corresponding benefit.
The Tribunal's answer starts with a fact that undercuts the premise. From the minutes of the Southern Region joint study meeting of 10 and 11 May 2018 — filed by TANGEDCO itself with its rejoinder — the entire 2 x 660 MW capacity of Coastal Energen is pooled at the Tuticorin Pooling Station, not merely the 558 MW covered by long-term access. So too is generation from the Kudankulam nuclear station of 2 x 1000 MW and the Tuticorin joint venture of 2 x 500 MW, neither of which was specifically mentioned in the planned scheme. Utilisation of the assets is not confined to transferring 558 MW to Tamil Nadu.
On the planning point the Tribunal accepted that by the time Ind-Barath announced abandonment, execution had progressed too far to be altered. It then set out the principle at some length. Planning is necessarily based on assumptions and projections, and actual developments may differ from what was envisaged. A good planner does not stay passive when the assumptions fail; the plan is adapted so that the assets created continue to serve their purpose and are used efficiently. That matters more in transmission than elsewhere because transmission investments are large and lumpy. Where a line is under-utilised because the expected generation did not materialise, the answer is not necessarily to write it off as an inefficient investment and leave it idle, but to consider whether generation can be developed at the connected stations or whether other generation or demand can be connected so the capacity is used.
The Bench illustrated the allocation of responsibility with a housing analogy. An architect designs an apartment complex with a park, a clubhouse and other common facilities sized to the number of flats proposed and the occupancy anticipated. If fewer flats are later occupied, the architect cannot be blamed for the under-utilisation, provided the design was appropriate on the information and projections reasonably available when it was made. The same goes for the contractor who builds to the approved design — unless, before the relevant stage of execution, it was told to defer, modify or omit a facility, which would carry its own cost and contractual consequences. And where the contractor also maintains the common facilities and is entitled to recover admissible fixed costs, lower occupancy does not by itself justify reducing that recovery: the cost is incurred in creating the facility, operating it and keeping it available, and does not depend on how much it happens to be used at a given moment.
Transposed, the planning agencies are the architect and the transmission licensee the contractor, and the fixed cost of keeping a line available is recoverable whether or not the generation behind it turned up.
Where the regulator fell short
The Tribunal did not give the Commission a clean bill. Its orders had given a reason for pooling the charges — that the assets form part of the meshed transmission network — and the Tribunal accepted that this means the orders cannot be called unreasoned. But the reasoning is brief, and the fact that assets form part of a meshed network does not by itself preclude bilateral billing. There have been instances where bilateral billing has been imposed, particularly in cases of default, and the Commission appears to have missed that. Its reasoning does not adequately explain why, on these facts, the charges had to be shared through the pooled mechanism by all designated users.
The orders therefore fall short of adequately explaining the rationale for the conclusion they reach, and a reasoned order should ordinarily set out adequate justification for its conclusions. What saved them is that the absence of fuller reasoning is not, by itself, a ground for setting an order aside where the entire record, the applicable regulations and the parties' submissions are before the appellate forum and the issues have been fully argued. The Tribunal determined the substantive challenge on its merits instead of remitting it.
Outcome
Appeal Nos. 56 and 329 of 2018 were dismissed and the Commission's orders of 19 September 2017 in Petition No. 235/TT/2016 and 21 November 2017 in Petition No. 71/TT/2017 were upheld. The pending interlocutory applications were disposed of in the same terms.
The transmission charges continue to be shared through the point of connection mechanism by all designated users of the interstate system. The appeals were decided on 13 October 2026, eight years after they were filed, and roughly ten years after the assets were declared commercially operational. An appeal lies to the Supreme Court under Section 125 of the Electricity Act, 2003.