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Performance Audit of

Planning and implementation of transmission projects by Power Grid Corporation of India Limited and

Grid management by Power System Operation Corporation Limited

Union Government (Commercial)Ministry of PowerReport No. 18 of 2014

Report of the Comptroller and Auditor General of India

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• TheAuditReporthasbeenprepared inaccordancewith the Performance Audit Guidelines andRegulations on Audit and Accounts, 2007 of theComptrollerandAuditorGeneralofIndia.

• Thisbookletabstractsthesalientauditfindingsandrelated recommendations contained in the auditreport.

• TheCDcontainscompletereportoftheComptrollerandAuditorGeneralofIndiainEnglishandHindi.

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IntroductionInterstateandintrastatepowertransmissionsystems

areinterconnectedandtogetherconstitutetheGrid.PowerGrid Corporation of India Limited (PGCIL), a NavratnaCentralPublicsectorundertaking,wasestablishedundertheadministrativecontrolofMinistryofPower(MOP) in1989toimplementthedecisionofGOItoforma‘NationalGrid’.

Inadequacies in transmission network and delayin commissioning of transmission projectsmay not onlyresult in lossof revenue forPGCILbutmayalso lead tocongestion in evacuation of power. Creating lines ofhighercapacitythanrequiredorabnormalredundanciesintransmissionassetsmayresultinextrafinancialburdenonbeneficiariesandpublicatlarge.Accordingly,performanceauditwastakenuptoassesstheeffectivenessofplanningandimplementationoftransmissionprojectsexecutedbyPGCILduringXIPlan(2007-2012)andGridManagementbyPowerSystemOperationCorporationLimited(POSOCO),awhollyownedsubsidiaryofPGCIL.

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Audit Scope and Sample

The performance audit examined activities fromconceptualization to implementation of selected majortransmissionprojectsexecutedbyPGCILbetweenApril2007andMarch2012alongwiththestatusofaugmentationtotransmissionnetworkmadebyPGCILuptoMarch2013.Asampleof20transmissionprojectsrepresenting14per centintermsofnumberand37per centintermsofvalueoftheprojectsplannedandexecutedbyPGCILduringApril2007andMarch2012wastakenbasedonmaterialityandcoverageofallRegionalOfficesofPGCIL.

InthewakeoftheincidentofGriddisturbanceson30and31July2012,theaspectofGridmanagementbyPOSOCO, which is mandated with the responsibility toensure integrated operation of the ‘National Grid’, wasalsoincludedinthescopeofaudit.

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Planning and project conceptualisation Progress in the formation of ‘National Grid’

• The process of integration of five regional grids(Eastern, Western, Northern, Southern and NorthEastern)wasprogressivelytakenupfromthe1990sandwiththesynchronisationofSouthernGridwiththerestofthegridon31December2013,theentireIndianpowertransmissiongridwasbeingoperatedatthesamefrequencycompletingthetechnicalprocessof formationof ‘NationalGrid’.However, fouroutof six inter-regional corridors (WR-NR, WR-ER, ER-NERandWR-SR)werecapableofcarryingonly1.5per centto3per centofinstalledpowergeneratingcapacityintherespectivepowersurplusregions.Inthreeoutofsixinter-regionalcorridors,thereiszeromargin(WR-SR)/negligiblemargins(ER-SR,WR-NR)over and above the capability required to cater tolong term customers. Low level of inter-regionaltransfercapabilityimpliedlimitedscopefortransferof power among regions.Hence, the objectives offormationofNationalGrid i.e.meetingdeficitfrom

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Audit findings

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surplusregionsandfacilitatingeconomicexchangesremainedtobefullyachieved.

Lowtransfercapabilityalsoledtopersistentcongestionduetotransmissionconstraints.Powerexchangedatashowedthatpercentageoftimecongestionoccurredabove 75 per cent increased from twomonths in2010-11toallthe12monthsin2012-13.Impactofcongestionwasvisibleinlargevariationsinelectricityprices.Buyers inS1andS2bidareas (TamilNadu,Kerala,AndhraPradesh,Karnataka,southGoaandUnionTerritoryofPondicherry)consistentlyincurredhigherpricesduringthelasttwoyears(`5.1to`7.3perunitofelectricityasagainstunconstrainedmarketclearingpriceof`3.5perunit)toprocurepowerduetotransmissionconstraints.Ontheotherhand,sellersinW3, E1 and E2 bid areas (Chhattisgarh, Orissa,WestBengal,Sikkim,BiharandJharkhand)receivedlowerprices(`2.8to`2.9perunit)astheycouldnotsellsurpluspowertodeficitareasduetotransmissionconstraintswhichcouldhavebeenreducedthroughstrengtheningWR-SRandER-SRlinks.

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Audit findings

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Power transfer capability of inter-regional corridors

• Two parameters viz. Transmission Capacity andTransfer Capability are relevant for assessing thecapacity of inter-regional corridors. Transmissioncapacity of a corridor is arrived at by adding theratings of all transmission lines connecting tworegions. Transfer capability,which is ameasure oftheabilityofacorridor,asawhole,toreliablymovepowerfromoneregiontoanother,isoftenlessthanthetransmissioncapacityduetosystemlimitations.However,PGCILassessestheneedforaugmentationof capacity of inter-regional corridors based onlyon ‘Transmission capacity’ and does not monitoraugmentation of total transfer capability (TTC),though TTC is important for better appreciationof the ability of transmission network to transferpower.CumulativetransmissioncapacityattheendofXIPlanarrivedatbyaddingphysicalcapacityofallinter-regionallineswas25050MWagainstwhichthecumulativetransfercapabilitywasonly11530MW.

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Audit findings

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Development of inter-regional corridors

• Bulk of the inter-regional augmentation effortsachievedinXIPlanandplannedforXIIPlanhavebeen across the ER-NR and ER-WR corridors towheel power from the pit-head power plants inthecoalrichERtothedemandcentresinthenorthand thewest. 63per cent of total inter-regionaltransmissioncapacityof25050MW(cumulativeattheendofXIPlan)wasconcentratedalongthesecorridors.Offlinesimulationstudiesconductedbyan Expert Group constituted by MOP followingtwo major Grid disturbances of 30 and 31 July2012haveshownthattheWR-NRlinkisthe‘shorttie’(transmissionlinkshorterinlengthandtying/connecting two regions) for import of power byNRand in the caseof lossof the ‘short tie’, the‘long tie’ ofWR-ER-NR could also be lost due toangular separation and power swings. Further,TTC ofWR-ER (1000MW) was only half of TTCofWR-NR (2000MW) with the result that once

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Audit findings

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theWR-NRtiewaslost,sufficientcapacitywasnotavailableinWR-ERrouteforrequiredpowerflows.Hence,highlevelofaugmentationofthe‘longtie’wouldnotyielddesiredresultsfortransmissionofincreasedpowertoNR.

• Agra-Gwaliordoublecircuit line,atrunk lineoftheWR-NRcorridor,wasupgradedfrom400kVvoltagelevel to 765 kV in March 2013. The upgradationcreated a 765 kV line in parallel with a 220 kVnetworkwithoutany400kVsystem in theWR-NRinter-regionalcorridor.Theimpactofsuchaformationwasthatintheeventoflossofboththecircuitsof765kVline,therewouldbea‘cascadetripping’of220kVnetwork.TTCofWR-NRcorridorwhichwasenhancedfrom2000MWto5700MWinMay2013following the upgradation of Agra-Gwalior line,was rolled back inOctober 2013, due to reliabilityconsiderations.Thus,theupgradationto765kVlineintheWR-NRcorridorworsenedanalreadydelicatenatureofWR-NRinterconnection.

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Audit findings

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Utilisation of transmission lines

PGCILhasnotputinplaceamechanismforassessingutilisationof transmission lineswith the result thattherewere pockets of congestion aswell as areasof redundancy. Out of 22 high voltage 765 kVlines,sixlinesremainedunderchargedat400kVformorethan5yearsoutofwhichtwolinesremainedunderchargedformorethan13years.During2011-12,averageutilisationof33outof40inter-regionallinesrangedbetween0to30per centinallinter-regionalcorridorsexceptWR-SRandER-SR. Incaseof intra-regionallines,478(68per cent)outof706linesinfive regionshadaverageutilisationof less than30per cent.

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Audit findings

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Targets and Achievement

XI Plan stipulated target of inter-regional transfercapacityof17000MW.AgainsttheXIPlantargetof17000MW,PGCILachieved13900MWofinter-regionalcapacityleaving a shortfall of 3100 MW in achievement. Whileshortfalltotheextentof1000MWwasduetoannulmentofoneoftheprojects,theremainingshortfallof2100MWwasduetofactorslikedelayinsubmissionofproposalforforestclearanceandlandacquisitionissues.

MOUtargetsforinter-regionalcapacityaugmentationbyPGCILfor2007-12werefixedat10100MWwhichwereshort of the correspondingXI plan target by 6900MW(17000MWminus 10100MW). In two years (2007-08and2010-11)MOUtargetswerefixedat‘Nil’.

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Audit findings

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Investment Approval and Project FundingInvestment Approval

TheReportoftheWorkingGrouponPowerconstitutedby Planning Commission provided that detailed surveyshouldbecarriedoutbeforestartofprocurementprocesstoavoidlargequantityvariationsduringexecutionwhichcouldbeacauseofdispute/delay.Works&ProcurementPolicyandProcedures(WPPP)ofPGCIL,however,requiredthatdetailedsurveyofforeststretchesandrivercrossingsshouldbecarriedoutbeforepreparationofBOQandcostestimates.ThusWPPPlimitstheexerciseofdetailedsurveyonlytoforeststretchesandnottothewhole lineroute,advisedbytheWorkingGrouponPower.

PGCIL, however, as a practice did not conductdetailedsurveysofforeststretchesbeforepreparationofBOQandcostestimates,asstipulatedinWPPP.Quantitiesfor the purpose of FR were estimated based on forestatlas,topo-sheetandwalkoversurveyofthearearesultinginsignificantvariationsatthetimeofactualexecutionofprojects.

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Non-adjustment of STOA charges from project cost

PGCIL received ` 906.49 crore between 2004-05and2012-13aspartofShortTermOpenAccess(STOA)charges thatwere required tobeused forbuildingnewtransmissionsystemsasperregulationsandordersofCERC.PGCIL,however,didnotmaintainproject-wisedetailsofinter-regional/intra regional transmission schemeswheresuchSTOAchargeswereutilised.ThismeantthatPGCILhad used this as a revenue stream for itself instead ofusing it for funding new transmission systems/schemes,whichwouldhave resulted in reductionof tariffof suchschemestoberecoveredfromcustomers.

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Project Implementation and ExecutionDelay in commissioning of projects

• Outof20 transmissionprojects selected forAudit,onlyoneprojectwascompletedwithinscheduledtimeanddelaywasabove20monthsinnineprojects.Mainreasonsfordelaysinexecutionoftheaboveprojectswereattributabletoacquisitionofland,handingoversiteandapproveddrawingstocontractors,releaseofadvance to contractors and forest clearancewhichwerepossibletohavebeencontrolledbyPGCILwithmoreeffectiveplanningandmonitoring.PGCILalsolosttheopportunityofearning`350.28croreduringtheprojectlifetowardsadditionalreturnonequity,which could have been earned in terms of CERCRegulations,forcommissioningofprojectswithintheprescribedtimelineincaseoffourprojectsapprovedafter1April2009.

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Audit findings

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Grid ManagementMajor Grid Disturbances of 30 and 31 July 2012

• TheCountryfacedasevereGriddisturbance(GD)on30and31 July2012which resulted in757millionunitsofenergynotbeingserved(comparedtototalgenerationof2400millionunitsperday) tousers.The proximate cause for themajor GD of 30 July2012(involvingNR)and31July2012(involvingNR,ER andNER)was the ill-planned shutdownof thetrunkline(400kVBina–Gwalior-Agraline)betweenWRandNRforfourdays(26to29July2012)inpeakseasonduetoconstructionwork.

• TheshutdownwasinitiallyplannedforfourdaysandTotalTransfercapability(TTC)ofWR-NRcorridorwascurtailed from2400MW to2000MW tomanagethepowerflows.Theshutdowngotextendeddueto non-completion of work, but TTC was restoredback to2400MW insteadof restricting it to2000

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MW. This led to scheduling of power by RegionalLoadDespatchCentres(RLDCs)beyondthecapacityof system. Over scheduling coupled with over-drawalsbyNRbeneficiariesandunder-drawals/over-injectionbyWRbeneficiaries/generatorsoverloadedthe systembeyondcontrol,whichultimately led to‘cascadetripping’ofalternatepaths.

• WesternRegionalLoadDespatchCentredidnotinstructWRgeneratorstobackdownpowergenerationanddidnot conveyeffective instructions toStatePowerUtilitiestoreduceunderdrawalofpower,whichwasamajorcauseforGD.StatePowerUtilitiesinNRandWRdid not complywith RLDCs’ instructions,whichcontributedtoover-loadingoflines.

Long term and systemic issues relating to Grid Management

• Systemic issues such as absence of early warningmechanism by way of declaration of emergencystatus,fragileinterconnectionofNRwithconnecting

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regionsduetoskewed inter-sedistributionofpowerflowamongthelinks,heavyvolumeofUnscheduledInterchange(UI)flowsduetocommercialconsideration,demand-supply gap and inter-play between UI andcongestion mitigation measures also contributed toGDsinJuly2012.

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Monitoring SystemProject Monitoring

• Monitoring mechanism for implementation oftransmissionprojects,thoughinplace,neededfurtherstrengtheningasprojectreviewmeetingswerenotheldaspertheprescribedfrequencyofonceintwomonths. Against 30 meetings required to be heldduring 2007-12, meetings ranging between threeandtwelvewereheldinvariousregions.Minutesofthepreawardmeetingsaswellasfollowupactiononthedecisionstakeninthepreviousmeetingswerenotrecorded.

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Basedontheauditfindingsdiscussedinthereport,the following recommendations are made to facilitateimprovement in the planning, implementation oftransmissionprojectsandmanagementofGrid:

(i) CEA and PGCIL may enhance capacity ofinterregional corridors appropriately basedon analysis of data regarding power transferrequirementsbetweenregionstofullyachievetheobjectiveofformationof‘NationalGrid’.

(ii) PGCIL may disclose and monitor the keyparameterofTTCinthelongandmediumtermasperCERCregulationsandforbetterappreciationofthetransfercapabilityofthesystem.

(iii) MOPmayevolvenormsforassessingefficiencyof transmissionnetworkand loss reduction inaccordancewiththetariffpolicy.

(iv) POSOCOmaystudythepossibilityofdevelopinga system for offering un-requisitioned inter-regionaltransfercapabilitytoneedyusersand

Recommendations

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considermakingaproposalinthisregardbeforeCERC.

(v) Toexpediteprojectexecution,PGCILmayinitiateadvance action to conduct detailed survey offorest stretches and submit forest clearanceproposals before investment approval of theproject.

(vi) SincelongshutdowntocarryoutconstructionworkwasthestartingpointfortwomajorGDs,POSOCO may stipulate tolerance limits forantecedent line loadings and ‘no-go’ periodsforkeycorridorsforallowinglongshutdownsto prevent GDs. POSOCO may also considertaking upwith CERC an appropriatewarningsystemthatspecifiesresponsibilitycentresthatwould be tasked with informing constituentsaboutstateofemergencyofthesystem.

(vii) Inorderto improvediligence indeclaringTTCandschedulingpower,POSOCOmaycriticallyreview the existing practices in this regard toensuresecuregridoperation.

Recommendations

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2020

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For further details please contact:Ms. Tanuja S. Mittal, Principal Director of Commercial Audit

and Ex-officio Member, Audit Board-III New Delhi.Email: mabnewdelhi3@cag.gov.in

© Comptroller and Auditor General of India2014

Website: www.cag.gov.in