The Maharashtra Electricity Regulatory Commission (MERC), in a recent order, asked Exide Industries not to pay any additional surcharge for captive power consumption and directed the Maharashtra State Electricity Distribution Company Limited (MSEDCL) not to levy any additional surcharge in the future. It also asked the state distribution company (DISCOM) to refund the additional surcharge already paid by Exide.
The Commission clarified that it had not gone into the merits of the issue raised by the MSEDCL in which it had stated that there could not be any sale or purchase of power in captive open access transaction and the current petition had been decided excluding the issue raised by the DISCOM. It further added that MSEDCL could file a separate petition where the issue raised by it could be adjudicated more holistically as per the regulations of the Electricity Act and open access regulations.
Exide Industries had filed a petition seeking directions against MSEDCL, claiming that MSEDCL had illegally levied the additional surcharge on the captive consumption of power generated from the project at the CSE Solar Sunpark and supplied to the petitioner under captive open access arrangement. It had also requested the Commission to direct MSEDCL not to levy additional surcharge in the future and directed MSEDCL to refund the additional surcharge paid by Exide.
Exide Industries has three manufacturing facilities at Ahmednagar, Chinchwad, and Taloja in Maharashtra. It has been consuming power at its manufacturing locations as a captive open access consumption from CSE Solar Sunpark. The company owns nearly 27.19% equity shares in CSE Solar Sunpark and qualifies as a captive consumer.
The company had procured electricity from CSE Solar Sunpark under short-term open access until October 31, 2020. After that, it has been procuring under medium-term open access from November 01, 2020, to date.
Exide, in its submission, said that there were no other consumers procuring power from the said generating station, and it was not a group captive project with multiple consumers but a captive project with a single consumer.
It further added that while submitting the open access application, it was incorrectly advised that only those consumers who have their power generating projects set up in their premises with 100% shareholding fell within the definition of a ‘captive power project.’ Therefore all other captive users ought to choose the option of a ‘group captive project.’
MSEDCL, in its reply, stated that Exide had made its open access application under the ‘group captive mechanism’ based on which the DISCOM levied the additional surcharge.
Exide further added that the Electricity Rules, 2005 made no distinction on shareholding for captive consumption. The shareholder, holding 26% or more in a generating company, was entitled to consume the entire electricity as captive consumption.
The Commission stated that at the time of grant of open access, MSEDCL had not raised any dispute on the petitioner’s status of being a consumer of the captive power project, citing the existence of the power purchase agreement (PPA) between the petitioner and CSE Solar Sunpark.
The Commission clarified that MSEDCL had interpreted the Electricity Act provisions to claim that if there was a purchase and sale of electricity, such arrangement could not be treated as a captive arrangement. The Commission added that the adjudication outcome (which may favor captive consumers or MSEDCL) on this issue might impact other captive consumers in the state and asked DISCOM to file a separate petition for it.
The regulator observed that Electricity Rules, 2005 allows even a single captive user with minimum equity shareholding of 26% in the power project to be a captive user of the project, which can consume a minimum of 51% energy generated from the power project.
“While the captive status of the petitioner could be determined only at the end of the year based on actual consumption by the petitioner vis-à-vis the generation from the power plant, the Commission does not find any reason to deny the claim that it is a consumer of the individual captive power project,” the Commission noted.
Considering all the facts, the Commission ruled that Exide was an individual consumer of the captive power project and hence it would not pay the additional surcharge. It also directed MSEDCL to refund the additional surcharge paid by Exide in the past.
In April last year, MERC announced various charges payable by open access consumers for the financial year (FY)2020-21 to 2024-25. MSEDCL had said that consumers were buying a considerable amount of power under open access, and on the other hand, it has tied up a sufficient amount of power to meet the expected demand by considering the overall growth in the state.
Earlier, the Appellate Tribunal for Electricity had ruled that no additional surcharge would be levied on captive users, a ruling that had set aside another order passed by MERC in September 2018.
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Rakesh is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). More articles from Rakesh Ranjan.