February 13, 2013

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Electricity and the Law

- Rohit Yadav, Partner [ Archer Jurists LLP ]

Rohit Yadav

The Central Electricity Regulatory Commission, in the exercise of the powers conferred on it, has issued the Regulations 2012 which are aimed at obtaining greater grid security and maintaining discipline amongst the regional electricity grids in the country

There was a major grid disturbance in the Northern Region at 02.33 hrs on July 30, 2012. The Northern Regional Grid load was about 36,000 MW at the time of the disturbance, which was followed by another grid disturbance at 13.00 hrs on July 31, 2012, resulting in the collapse of the Northern, Eastern and North-Eastern regional grids. The total load of about 48,000 MW was affected in this blackout. On both the days, only a few pockets escaped from this blackout.

One of the objectives of load despatch is to maintain power system parameters within permissible limits. The frequency, being one of the parameters, has to be maintained at 50 Hz. or close to 50 Hz. For historical reasons, the Indian Grid Systems have experienced poor frequency profile particularly in the 1990s, when more loads were met with available generation at the cost of frequency and the system was subjected to operate in the range of 48-51.5 Hz. Due to which the power quality and Grid security was compromised during this period. To enforce Grid discipline and to improve frequency profile, a new tariff mechanism was conceived in the early 1990s. The earlier PLF based tariff was replaced by Availability Based Tariff (ABT). Apart from fixed and variable charges, ABT had a third component, namely Unscheduled Interchange (UI) charge. UI charge is payable if a utility is deviating from schedule (Generation/withdrawal) depending on the frequency. The gap between the supply and the demand of electricity is mainly measured by the system frequency and when the demand equals the supply, the system frequency will be 50 Hz.

Each of the five regions have a Regional Load Despatch Centre (RLDC), which ensures economic, efficient and integrated operation of the power system in the region concerned. The RLDCs monitor the grid operations and supervise the economical, efficient and integrated functioning of the power systems and any difference between the scheduled and actual quantum of power drawn from the grid is treated as Unscheduled Interchange. The charges of the Unscheduled Interchanges shall be payable for the over-drawal, by the buyer or the beneficiary.

ABT was first implemented in the Western Region (“WR”) on July 1, 2002, whereafter it was possible to implement it with the regulatory support and hence there was positive improvement in the frequency profile. Initially, the frequency band stipulated was 49.0-50.5 Hz and subsequently, the range was tightened by the Central Commission. In the interest of power quality and grid security, there arose a definite need to operate the system at and very close to 50 Hz. It is further observed that Utilities resort to load shedding to earn revenue through UI to compensate their poor financial management. If the frequency profile is close to 50 Hz, UI rate is nominal and utilities tend to over draw/ under draw, thereby completely deviating from the schedule. If more number of utility players resort to such activity, it may even lead to load encroachment phenomena and grid disturbance, as has been observed in recent grid disturbances.

One has to draw power only through long term, medium term or short term contracts and not through the UI. Thus the main reason for the recent Grid Collapse was over drawal by various agencies.

To overcome such a situation of over drawal, the Central Electricity Regulatory Commission (“CERC”), in exercise of the powers conferred, under Section 178, read with Section 79(1)(C) of the Electricity Act, 2003, has issued the Central Electricity Regulatory Commission (Unscheduled Interchange Charges and Related Matters) (Second Amendment) Regulations, 2012 (“The Regulations”). By the Regulations, the CERC has narrowed down the operating frequency of electricity supply (Grid Frequency) by 0.2 Hz i.e. from 49.50-50.20 Hz to 49.70-50.20 Hz in the Grid Code, as well as in the Unscheduled Interchange Charges and related matters. The regulations are only aimed at obtaining greater grid security and maintaining of discipline amongst the grids. Liability to pay the UI charges would arise only when there is any unscheduled drawal from the grid and a penalty that has been imposed for over-drawal cannot be shown as a reason for the increase in the price of the electricity. In order to avoid the payment of such UI charges, purchasing power from the distribution companies and informing about the necessity for the transmission of the power purchased, from the distribution companies, could be resorted to. Long–term and medium-term contracts or arrangements must be entered into for the supply of electricity, by the distribution companies, instead of overdrawing power from the grid, when it is in short supply. Arrangements for getting power from wind and solar power generators can also be resorted to and hence it would not be appropriate to consider UI as a viable source of drawing electricity.

The Central Electricity Regulatory Commission (Unscheduled Interchange Charges and Related Matters) (Second Amendment) Regulations, 2012 were thus promulgated in order to promote more grid safety and stability against any major or minor grid collapse but even the said regulations could not escape the demon of unwarranted litigation against them

The Ministry of Power constituted an Enquiry Committee, to analyse the causes of these disturbances and to suggest measures to avoid recurrence of such disturbance in future. The committee analysed the output of disturbance recorders and different data and output submitted by various entities and thus made the recommendations. As per the said committee, further tightening of the frequency band by the Central Commission has been challenged in the court. The UI mechanism, which helped the system initially, needs to be reviewed now.

It is also relevant to mention that narrowing down the frequency band would be a pre-requisite for integration for N-E-W grid (Northern, Eastern, Western and North-eastern grid) with Southern Region grid. This is because, the larger integrated grid will have a huge power number, i.e. the change in frequency will be small for a large change in Load or Generation. This situation may lead to dangerously high line loading at far end in case of contingencies like tripping of generating units, as the state utilities operate the grid with limited visibility of the state network and system frequency. This situation may end up with major grid disturbance if the frequency band is wider. Even in the present scenario, some of the critical transmission lines/transformers are loaded to such a level that any incremental loading due to contingencies may lead to cascade tripping. The state utilities continue to draw more just by keeping the minimum mandated frequency level as reference for their demand management.

The regulations were thus promulgated in order to promote more grid safety and stability against any major or minor grid collapse but even the said regulations could not escape the demon of unwarranted litigation against them. The Tamil Nadu Generation and Distribution Corporation Limited filed a writ petition before the High Court of Madras challenging The Regulations on the grounds that the said regulations are arbitrary and suffer the vice of unreasonableness. The thrust of challenge of the said writ petition was upon the fact that while the four grids namely, northern, eastern, western and north-eastern are synchronised with each other (NEW GRID) and the power can flow across these regions, seamlessly, as per the relative load and generation, the southern region is interconnected with the rest of India grid through asynchronous links of High Voltage Direct Current networks.There is only controlled flow of power and it cannot flow seamlessly, as per the relative load and generation. Other grounds such as enhancement of power cuts increase in the tariff which would ultimately trickle down to the end consumers and grounds relating to the enforceability and power of the commission. The said writ petition was dismissed by the High Court of Madras holding that The Regulations have been promulgated with the object of efficient, integrated and economic supply of electricity and that in the case of certain policy decisions which are made on the basis of technical data, the power of judicial review cannot be invoked. It is also held that The Regulations are within the mandate of the Electricity Act, 2003 and the National Electricity Policy and hence the writ petitions are devoid of merits.


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