Draft Amendments to Qualify for Captive Generation Project Released

In its latest order, the Rajasthan Electricity Regulatory Commission (RERC) has clarified the definition of a captive power producer (CPP).

The commission was hearing a petition filed by Tesco Energy Two for the adjudication of a dispute regarding power evacuation permission.

The respondents in the case were Rajasthan Vidyut Pasaran Nigam Limited (RVPNL) and the Rajasthan Renewable Energy Corporation Limited (RRECL).

Tesco Energy Two private limited had set up its captive solar power project of 3.3 MW capacity under Rajasthan Solar Policy, 2014 at village Badiseed, Tehsil Bap, Jodhpur.

It entered into a power purchase agreement (PPA) on November 7, 2017, with Secure Meters Ltd., Udaipur as its 100% captive power user.

Later, a shareholders agreement was signed in August 2018 among Secure Meters Ltd. (SML), Tesco Energy Pvt. Ltd. (TEPL) and Youngistan Renewable Energy Solutions Pvt. Ltd. (YRESPL). In the agreement, the shareholding was in the ratio of 26:37:37. Tesco had achieved the financial closure from the State Bank of India.

In a letter to the RERC in November 2017, the company submitted its evacuation and drawal plan. The power generated was to be evacuated through a common pooling station located in the park through a 3.3 kV line and injected to the grid substation.

The contention of Tesco has been that the withholding of permission for power evacuation by RVPN has not only delayed the setting up of the project of the petitioner but also resulted in a huge financial loss as they were unable to take the benefit of 50% subsidy of transmission charges which is available for  projects  set up on or before March 31, 2018.

RVPN had said in its rejoinder filed with the RERC that It is a clear case of sale of electricity in the garb of captive generating project. “Provisions of Rule 3 of the Electricity Rules, 2005 must be construed in consonance of the provisions of the Electricity Act, 2003, particularly in consonance of the provisions of Section 2 (8),” it added.

The commission, in its order, said, “Tesco Energy project does not fall under the definition of “captive generating plant” as per Section 2 (8) of the Electricity Act, 2003 and Rule 3 of the Electricity Rules, 2005. It cannot be treated as a captive power plant, and hence no relief could be granted.”

The commission observed in its order that, “In the present case, the shareholders in the company have equity shares in the ratio of 37:37:26 respectively and must consume electricity in proportion to their shares of the ownership of the project within a variation not exceeding (+) 10%. But admittedly, Secure Meters Ltd. one of the shareholders, proposed to consume 100% of the power generated through the solar project, hence is not fulfilling the rule of proportionality of consumption to the percentage share of ownership as an association of persons and thus it not a CPP.”

The Rajasthan Electricity Regulatory Commission had earlier heard a petition filed by Arjun Green Power Pvt. Ltd. for the adjudication of a dispute regarding the extension of commercial operations date of the solar project and the determination of tariff and liquidated damages under the power purchase agreement. It had then clarified that for projects delayed beyond their commissioning timeline, the tariff applicable would be the one that was chosen for the year in which the project became commercially operational.

 

In an earlier order, the RERC fixed ₹3.93 (~$0.06)/kWh as the generic tariff for solar PV projects without accelerated depreciation in Rajasthan. The tariff was levelized for 25 years. The AD component of the tariff had been fixed at ₹0.27 (~$0.004)/kWh. The new benchmark tariff with AD is ₹3.66 (~$0.056)/kWh, applicable to all solar PV projects with signed power purchase agreements on or before March 31, 2018, and commissioned on or before March 31, 2019.

Soumik is a staff reporter at Mercom India. Prior to joining Mercom, Soumik was a correspondent for UNI, New Delhi covering the Northeast region for seven years. He has also worked as an Asia Correspondent for Washington DC-based Hundred Reporters. He has contributed as a freelancer to several national and international digital publications with a focus on data-based investigative stories on environmental corruption, hydro power projects, energy transition and the circular economy. Soumik is an Economics graduate from Scottish Church College, Calcutta University.