The Karnataka Electricity Regulatory Commission (KERC) has ruled that a power generator needs to fulfill only the two conditions provided in the Electricity Rules, 2005, to attain the captive status – the shareholding pattern and minimum consumption.

The Commission noted that the consumers of Clean Wind Power’s 50 MW wind project satisfied these conditions by holding 32.90 % of the equity shares and consuming 100% of its total energy.

Clean Wind Power (Manvi) had filed a petition to declare its 50 MW wind power project as a captive power project for FY 2017-18, which allows the consumer to avoid the cross-subsidy surcharge.

Background

Clean Wind Power (Manvi), the petitioner, is a special purpose vehicle (SPV) of Hero Wind Energy and is a registered company under the Companies Act 2013. It owns and operates a 50 MW wind power project in Raichur, Karnataka.

The company sought to declare its 50 MW wind power project as a captive power project and challenged the action of the Chamundeshwari Electricity Supply Corporation (CESC) to impose a cross-subsidy surcharge as unlawful.

The wind power generator has 12 shareholders, out of which 11 are captive users who consume 100% of the electricity, and the one remaining shareholder is Hero Wind Energy.

The petitioner submitted that all the electricity supplied from the wind power project to its captive users during FY2017-18 should be exempted from payment of a cross-subsidy surcharge, as it had fulfilled the requirements of a captive power project as prescribed under the Electricity Rules 2005.

The wind power generator added that for FY 2017-18, the total generation from the wind power project was 99,740,724 units, and the total consumption by the captive users was 99,756,000. Thus, the captive users had consumed 100% of the energy generated during FY2017-18.

The petitioner also submitted a shareholding certificate certifying 32.90% shareholding of the captive users in the wind power project.

The wind power generator noted that it had fulfilled all the requirements of a captive generating project during FY 2017-18 and should be exempted from payment of the cross-subsidy surcharge.

The wind power generator contended that CESC had overlooked that each fiscal year has to be assessed separately for verification of captive status in terms of the requirements stipulated in the Electricity Rules, 2005, and the assessment has to be done at the end of each financial year.

The state distribution companies (DISCOMs) argued that the consumers of the petitioner were not consuming electricity in proportion to their shareholding pattern. Hence, as per the Electricity Rules 2005, even if one of the consumers was not consuming energy in proportion to their shareholding, then the entire energy generated should be treated as if it is a supply of electricity by a generating company and not by a captive generating company.

The Commission, in its earlier order, had dismissed the request of the wind power generator to grant captive status to its project for FY 2017-18, as the Commission was unable to ascertain the shareholding pattern of the captive users at the time of the establishment of the generating unit.

Subsequently, the petitioner challenged the order before the APTEL.

APTEL, in its order, had partially set aside the judgment passed by the Commission and had said that there was no requirement for ascertaining the shareholding pattern of the entity claiming to be a captive user at the time of the establishment of the generating unit.

APTEL had set aside the order and had remanded it back to the Commission to take a fresh look at it.

Commission’s analysis

The Commission noted that considering APTEL’s earlier orders, it took into account the shareholding pattern of the petitioner as on March 31, 2018, for the determination of the captive status, and as per the shareholding pattern on the day, captive consumers held 32.90% of the equity shares.

The Commission further added that the SPV needed to fulfill only two conditions regarding the shareholding pattern and the minimum consumption for the declaration of the captive status.

The state regulator noted that the wind power generator satisfied the requirement by holding 32.90% of the equity shares and consuming 100% of its total energy.

The Commission declared it a captive generating project for the financial year (FY) 2017-18.

Earlier, KERC had ruled that the Green Infra Wind Power Generation-owned Harapanahalli Wind Power Project was a captive power project. The Commission had directed the Bangalore Electricity Supply Company to refund the amount received towards cross-subsidy surcharge, additional surcharge, and differential electricity tax, if any, within three months from the order date.

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