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					</table>The Madhya Pradesh Electricity Regulatory Commission (<a href="https://mperc.in/index.htm" target="_blank" rel="noopener">MPERC</a>) has issued a detailed procedure to verify captive generating projects and user compliance per the Electricity Rules, 2005 provisions.
The procedure will be applicable for the financial year (FY) 2023-24.
The Madhya Pradesh Power Transmission Company (<a href="https://www.mptransco.in/" target="_blank" rel="noopener">MPPTCL</a>) will be the designated authority to determine the captive status of the captive generating projects and captive users.
The general provisions for verifying the compliance of captive generating projects with the regulations of the Electricity Rules, 2005, are mentioned below:
Throughout the year, the captive user must maintain ownership of the generating project or unit designated for captive use at a minimum of 26% with voting rights. Additionally, they must consume no less than 51% of the electricity generated annually.
If there are multiple captive users, they must collectively hold a minimum of 26% of the paid-up equity share capital with voting rights for the entire year. They must consume electricity generated by the captive project in proportion to their respective shares, ensuring that their consumption remains at least 51% of the total electricity generated, with a permissible variation of not more than 10%. The proportionality test will be applied to the net 51% of aggregate generation and not to any consumption exceeding this amount by a captive user.
In the scenario where the generating project is owned by a special purpose vehicle (SPV) company and consists of multiple generating units, the captive users must collectively hold a minimum of 26% of the proportionate paid-up equity share capital with voting rights. They must consume at least 51% of the electricity generated annually for their captive use throughout the year. The user is required to annually consume a minimum of a net 51% of the energy generated specifically by the identified generating unit for captive use, not considering the entire generating project&#8217;s output.
The same holds true if the generating project is owned by a company that is not an SPV.
In the case of a cooperative society, the members should collectively satisfy at least 26% of the ownership throughout the year and collectively consume not less than 51% of the energy generated on an annual basis.
If there is a change in ownership structure, the adjustment in shareholding to maintain a minimum ownership of 26% throughout the year should be carried out. However, such changes in shareholding must be communicated to both the distribution company (DISCOM) and the designated authority within 15 days of the occurrence. If the change is not communicated within the specified period, The designated authority may conduct verifications in case of failure to do so.
The guidelines for verifying captive power projects in Madhya Pradesh are in sharp contrast to the notification <a href="https://www.mercomindia.com/user-mandated-26-shareholding-group-captive-project">issued</a> by the Ministry of Power, which clarified that each captive power user, even in a group captive structure of open access, must now hold a minimum ownership of 26%.
Determination of gross net generation 
The net energy generated from the unit identified for captive use should be the gross energy generated from the unit minus the aggregate auxiliary consumption during the 15-minute time block. The net energy generation in all the time blocks of the year should be grossed up to determine the gross net generation of the captive unit.
When it comes to open access, the energy consumption by the captive user should be determined based on the lower value between two options: the net energy generated by the captive generating project or the actual or scheduled energy drawn through open access in 15-minute time blocks.
The applicant should submit the details of actual generation from the power project, auxiliary consumption, and the actual consumption made by the captive user annually.
Also, the period of year should be as defined in the MPERC (Verification of Captive Generating Projects and Captive Users) Regulations, 2023, for determining the captive status of the captive users.
However, in the first year of declaring the project under captive status, the start date for determining the project&#8217;s generation under captive status should be considered as the commencement date of open access. The period of the year should be calculated on a pro-rata basis.
If the shareholding pattern remains unchanged throughout the year, the verification of the consumption criteria, which includes consuming not less than 51% of the aggregate electricity generated and the test of proportionate consumption, should be conducted for the entire year. It is important to note that if the shareholding pattern changes during the year, the verification of the consumption criteria should be based on the energy generated and consumed during the corresponding period, taking into account the revised shareholding pattern.
Metering
Each captive generating project must install a dedicated special energy meter to accurately record the gross generation and auxiliary consumption. They must also have an automatic meter reading facility to transmit ABT meter data separately to the state load dispatch center (SLDC) and the DISCOM as per the specifications mentioned in the Madhya Pradesh Electricity Grid Code (Revision-II) 2019 and the Central Electricity Authority (CEA) (Installation and Operation of Meters) Regulations, 2006.
Each captive generating project should also establish a real-time data communication system to telemeter power system parameters such as flow, voltages, and switch statuses per the guidelines provided by the SLDC.
In the case of a co-located captive generating project that sells power through bilateral transactions to third-party consumers, it is necessary to arrange separate metering systems for both generation and self-consumption within the same premises.
Revocation of captive status
If the captive generating project or the captive user fails to meet the ownership and consumption criteria by the end of the year, as mentioned in Rule 3 of Electricity Rule 2005, their captive status for that specific year will be revoked. Consequently, they will be subject to the imposition of a cross-subsidy surcharge, additional surcharge, and any other relevant charges applicable to open access consumers and non-captive generating projects during that year.
In the event of failure to maintain captive status, the DISCOM has the authority to issue a demand for the applicable cross-subsidy surcharge, additional surcharge, and all other relevant charges for each month. Additionally, a delayed payment surcharge at a rate of 1.25% per month will be added from the due date of the demand.
If the DISCOM does not receive payment, they may discontinue open access under captive use after giving the consumer a 15-day advance notice. This action does not affect the DISCOM&#8217;s right to recover the outstanding charges in accordance with applicable laws.
Subscribe to Mercom&#8217;s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don&#8217;t miss any critical updates from the renewable industry.

Madhya Pradesh Outlines Procedure to Verify Captive Power Project Compliance

The Ministry of Power (<a href="https://powermin.nic.in/" target="_blank" rel="noopener noreferrer">MoP</a>) has issued amendments to the &#8216;equity lock-in period&#8217; given in the standard bidding documents to select transmission service providers for interstate transmission system (ISTS) projects.
As per the amendments, the selected bidder&#8217;s aggregate equity shareholding in the special purpose vehicle (SPV) should not be less than 51% up to one year after the project&#8217;s commercial operation date (COD). Earlier, the selected bidder&#8217;s aggregate equity share in the SPV was to be at least 51% up to two years after the commissioning date and 26% for three years after that.
This amendment would help investors looking for an exit by selling their projects in the secondary market as they do not have to wait for 2-5 years from the point of award.
In case the selected bidder is a consortium, any member (other than the lead member) will be allowed to divest its equity only if the remaining members hold the minimum equity. Under the existing provision, any member was allowed to divest equity if the remaining members&#8217; (including the lead member) aggregate share was not less than 26% for three years after the first two years, during which the members were required to hold 51% equity share in the SPV.
Further, if the equity is held by the affiliate or the parent company, such an entity would be permitted to transfer its shares to another affiliate. If the affiliate or the parent company fails to fulfill the above criteria, the shares were to be transferred to another affiliate company.
The above clause will be applicable if the bidding company or the consortium&#8217;s aggregate shareholding in the SPV&#8217;s paid-up share capital is at least 51% for one year after the project&#8217;s commissioning. The consortium&#8217;s lead member should have an equity share of 26% for one year after the project&#8217;s commissioning. Earlier, the aggregate shareholding of the bidding consortium was at least 51% up to two years, and the lead member was required to hold 26% of shares for up to five years after the commissioning of the project.
Bidder&#8217;s aggregate equity shareholding should not be less than 51% for one year after the project&#8217;s commissioning, the new clause said. If the lead member of the consortium or the bidding company holds equity through an affiliate or parent company, these restrictions will apply to such entities. The lead member of the consortium will continue holding 26% equity up to one year from the commissioning date. Earlier, the time was for five years after the commissioning date of the project.
Recently, the Ministry for New and Renewable Energy (<a href="https://mnre.gov.in/" target="_blank" rel="noopener noreferrer">MNRE</a>) <a href="https://mercomindia.com/official-state-run-bank-guarantees-solar/" target="_blank" rel="noopener noreferrer">issued</a> made similar amendments to its guidelines for the tariff-based competitive bidding process to procure power from grid-connected solar projects. The amendments addressed the minimum period of controlling shareholding to be maintained by the developers. Earlier, Mercom had <a href="https://mercomindia.com/guidelines-restrict-equity-investment-solar/" target="_blank" rel="noopener noreferrer">written</a> about the developers&#8217; concern that the timeline to maintain the controlling shareholding (51%) for three years was too long and unreasonable, restricting short-term equity investment in the sector.
Regulations in the power sector, especially renewables is hard to keep up as the numbers are growing by the day. Subscribe to Mercom&#8217;s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener noreferrer">Regulatory Updates</a> to ensure you are in the loop.
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