The Appellate Tribunal for Electricity (APTEL), in a recent ruling, stated that the Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) could only be entrusted with the exercise of collecting and verifying data on the status of open access projects for captive use. However, it is the state Commission that will decide on any action to be initiated against the captive power projects or users or for recovering the cross-subsidy surcharge per law.

The Tamil Nadu Power Producers Association (TNPPA) had filed a petition challenging the earlier order of the Tamil Nadu Electricity Regulatory Commission (TNERC), where it had formulated a process for verifying the status of captive users and captive generating projects located in Tamil Nadu.

Background

On January 28, 2020, the state Commission passed an impugned order laying down the guidelines for verifying captive power projects and users. While issuing the guidelines, TNERC also provided the criteria for granting wheeling approval before open access, which is said to be beyond its authority.

TNNPA, in its submission, said that the impugned guidelines to verify captive status could not be interlinked with the wheeling or open access approval. Such approvals must be strictly within the framework of TNERC Open Access Regulations, 2014.

TNPPA further added that the Commission, in its order, had exempted the operating companies owning captive projects from the test of proportional consumption. In addition, the Commission had also inferred that a non-operating special purpose vehicle (SPV) would not be required to fulfill the test of proportionate consumption of power and that such a company would only be required to fulfill the requirements of 26% minimum equity share capital and consumption of a minimum of 51% energy generated by the captive project.

TANGEDCO, in its reply, said that the assessment of shareholding patterns of captive users was sufficient to bring to light the entities who were wrongly availing the concession. Therefore, it was needed to verify when there was a change in the shareholding pattern of captive users.

The state DISCOM said that the right to avail of open access through captive status was distinct from accessing open access through non-captive status. Thus, the attempts by TNNPA and other generators to mix open access with captive generation ought to be rejected.

Tribunal’s analysis

The Tribunal said that TANGEDCO could be appointed for undertaking an exercise of collecting and verifying data for captive generating plant status in Tamil Nadu.

Also, if it was found that the open access was wrongfully denied or delayed, then TANGEDCO could not seek to claim a cross-subsidy surcharge at the end of the financial year.

On the point of equating an association of persons with an SPV, the Tribunal noted that the requirement of consuming a minimum of 51% electricity generated on an annual basis and the requirement of the captive users holding 26% of the ownership of the plant in aggregate could only apply to power projects set up by an association of persons but could not be applied to those set up by an SPV.

APTEL held that the requirement of 26% shareholding and 51% captive consumption were the minimum requirements to be fulfilled by a set of captive users, and once the same was done, the rest of the captive users not fulfilling the above conditions will have no impact to the overall captive structure. There cannot be any liability to make payment of cross-subsidy surcharge by defaulting captive users if the rest of the captive users fulfill the minimum requirements of 26% shareholding and 51% of consumption.

The Tribunal also added that there could not be a retrospective application of the procedure formulated under the impugned order to verify the status of captive projects and users in Tamil Nadu.

On the provision of the earlier order where it had been held that if the weighted average of shareholding of captive users changed within a financial year, then it would have to be intimated within ten days to TANGEDCO, APTEL observed that there were practical difficulties for captive users in the event the concept of weighted average was applied.

“Accordingly, we set aside the direction contained in para 7.6.9 of the impugned order, wherein TNERC has held that in the event the weighted average of shareholding of captive users changes within a financial year, then the same has to be intimated within ten days to TANGEDCO. Otherwise, the said licensee would proceed to verify captive status without considering the weighted average of shareholding,” the Tribunal added.

In March this year, TNERC proposed to levy 50% of the charges applicable for conventional power for transmission, wheeling, scheduling, and system operation charges for solar power procurement by distribution licensees. The Commission also proposed to levy 70% of the cross-subsidy surcharge applicable for conventional power for solar power procurement.

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