The Tamil Nadu Electricity Regulatory Commission (TNERC), in a recent order, revised the rules for the verification of captive open access projects.

The data verification procedure for providing captive status to a power project will be applicable from the financial year (FY) 2020-21. The Tamil Nadu Generation and Distribution Corporation (TANGEDCO) will verify data and assign captive status to the projects in the state based on data furnished by the captive power developers.

Indian Wind Power Association, Tamil Nadu Spinning Mills Association, Sugapriya Paper, and Boards had filed review petitions seeking clarifications regarding the TNERC Regulations 2004 and accordingly pass order making changes necessary for the verification of captive power projects.

Background

TANGEDCO had issued a memorandum requiring captive generators to furnish documents, data for verification of the status of captive power projects per Rule 3 of Electricity Rules 2005.

The captive generators filed a writ petition against the circular issued by TANGEDCO calling for the required details from captive power projects to verify the compliance with Rule 3 of Electricity Rules 2005.

The High Court of Madras ordered the Commission to look into the matter. This order was appealed by TANGEDCO, contending that they had the power to verify and adjudicate.

The petitioners sought clarification whether TANGEDCO was both the authority to collect and collate the information, as well as the adjudicatory authority in respect of captive generating projects verification. The petitioners sought the Commission to clarify the scope, extent, and manner in which the delegated powers were to be exercised by TANGEDCO.

The petitioners requested the Commission to provide details of the procedure with respect to the directions of APTEL of collecting and verifying data concerning captive power projects.

Commission’s analysis

The Commission observed that to conduct the verification process smoothly, a clear procedure was required to be framed considering APTEL’s directions and the clarifications raised by the review petitioners.

The Commission said that as per the directions of the Tribunal in the discussions and findings, all the captive generating projects owners should submit the data to TANGEDCO on or before May 31 of every year.

TNERC noted that APTEL’s order did not prevent TANGEDCO from conducting the exercise of verifying the data concerning captive power projects status for the past years.

Rules to be followed for the verification of captive projects

The Commission said that the failure to comply with the minimum percentage of captive use in a year would entail the captive generating project losing its captive status. The entire electricity generated from the project would be treated as a supply of electricity by a generating company.

All intended captive users, including any new captive user due to change in ownership, who require approval for open access, i.e., wheeling of energy generated from their captive generating plants to their respective high tension (HT) service connections, should furnish the required documents. When there is any change in ownership in the middle of the financial year, the new owner alone should submit the required documents to obtain approval for open access or wheeling of energy.

Also, the Commission added that the captive generators would be required to identify the units intended for captive consumption when furnishing documents for proof of ownership.

If there are one or more captive users, the user should hold not less than 26% of the equity share capital with voting rights and consume not less than 51% of the electricity generated annually for captive use.

The verification criteria of consumption will be based on the aggregate energy generated from generating units in a generating station identified for captive use before the commencement of captive wheeling to be determined on an annual basis, i.e., gross energy generated less auxiliary consumption.

The Commission stated that in the case of wind energy if the captive generating projects have multiple generating units having separate energy wheeling agreements with the ownership structure being the same in each agreement, aggregate energy of all generating units would be considered irrespective of separate wheeling agreements.

If the criteria of not less than 26% ownership and not less than 51% consumption were not met by the captive power project in a financial year, the generating project would cease to be a captive power project, and the user would cease to be captive and further liable to pay cross-subsidy surcharge.

On or before May 31 of every year, all captive power projects should furnish necessary documents for ownership patterns and relevant generation data to TANGEDCO.

Further, TNERC noted that TANGEDCO should verify the data every year to check the power project’s captive status and submit a report to the Commission every year on or before July 31 and furnish the verification details.

In its order dated February 27, 2009, the government canceled the temporary waiver of cross subsidy surcharges for captive projects. It authorized TANGEDCO to collect the cross-subsidy surcharges (for the purchased quantum from outside) from the HT consumers who were not availing TANGEDCO quota of power fully or partially and purchased power from outside sources.

The State Regulator added that there was no complete waiver of cross subsidy surcharges for the period in question, i.e., 2014-2016. In the case of captive users, the Commission, in recent orders, believed that there was no merit in strict adherence to all conditions in Rule 3 of the Electricity Rules 2005 for a captive power project when restriction and control measures on supply of electricity were in place.

For captive power projects with wind generating units, the net generation for wind = gross generation (–) banking charges (in units) (–) startup power (in units) (no auxiliary consumption for wind).

For all other generation sources, except wind, net generation = gross generation of generating project or units identified (–) auxiliary consumption (in case of SPV).

For captive users, the consumption to be considered for verification will be equal to the adjusted units grossed up with applicable transmission and distribution losses.

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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