Analysis of Gujarat High Court judgment on co-generation and RPO

On 12th March, 2015, The Gujarat High Court gave its judgment in the case of Hindalco (Birla Copper), and others. This is a landmark judgment for two reasons:

-          It says that CPP and open access (OA) consumers are liable to fulfill RPO

-          It holds that the ApTel’s conclusion that co-generation power is different from renewable power as held in the case of Lloyds Metal & Energy prevails over the earlier decisions as the Lloyds Metal case we delivered by a full bench. It held that the pervious judgments on this matter (Century rayon, and various others) have “no significance and force of law in view of judgment dated 02.12.2013 rendered by the Full Bench of the APTEL”.

Applicability of RPO on CPP and OA:

The Gujarat HC has considered various aspects and submissions on this topic. It has held that captive generation, while de-licensed activity, does not make a CPP outside the preview of the Electricity Act.

It also held that RPO regulations, made with the intent of greater social good, are applicable on “total consumption by all modes”. The judgment says:

“The fact remains that the area would always be of distribution licensee as the transmission lines and the system is of distribution licensee and, therefore, the phrase ‘total consumption’ is seen by consumers of distribution licensee, captive power plants and on supply through distribution licensee. Thus, the total consumption in the area of distribution licensee would be total consumption in all modes, otherwise serious consequences would follow.”(emphasis added)

In the above findings, the Gujarat HC is in line with the judgment earlier of the Rajasthan HC. In fact, that judgment has been relied upon to a great degree.

 On co-generation 

On the question of co-generation power being exempt from RPO as per the ruling of ApTel, the court has observed the following:

“That contention of Mr. S.N.Soparkar that co- generation plant of petitioners of Special Civil Application No.791 of 2011 that it is based on fossil fuel and is non-conventional in view of decision in the case of Lloyds Metal & Energy Ltd. [supra] of APTEL, though appears to be attractive on first blush but non-conventional energy cannot be equated always with renewable source of energy.”

and

“….. co-generation provided under Section 86(1)(e) of the Act, 2003 is not co-generation stand alone, but it is co-generation and generation of electricity from renewable sources of energy. Thus, a source or input of energy may be non-conventional in the sense that CGP or co- generation following innovative or advanced technology, which may be eco-friendly and reducing carbon credit, but only on that ground is not not the same renewable source of energy like hydro, wind, solar, biomass, bagasse, etc. That non-conventional energy always and for all purposes cannot be equated with non-renewable sources of energy.” (emphasis added)

The HC further added that the most recent judgment of the ApTel on the issue of RPO applicability on co-gen power – in the case of Lloyds Metal and Energy – prevails as it was rendered by the full bench of the ApTel, and therefore:

“Thus, judgment dated 26.04.2010 in Century Rayon [supra] [Appeal No.57 of 209]; judgment dated 17.04.2013 in IA 262 of 2012 in RP (DFR) No.1311 of 2012 in Appeal NO.57 of 2009 filed by Gujarat Electricity Regulatory Commission; judgment dated 30.01.2013 in Appeal No.54 of 2012 filed by M/s. Emami Paper Mills; judgment dated 31.01.2013 in Appeal no.59 of 2012 filed by M/s. Vedanta Aluminium Ltd. [VA]; and judgment dated 10.04.2013 in Appeal NO.125 of 2012 filed by M/s. Hindalco Industries Limited, all delivered by the APTEL have no significance and force of law in view of judgment dated 02.12.2013 rendered by the Full Bench of the APTEL in Appeal No. 53 of 2012.” (emphasis added)

Impact of the judgment

 The judgment is likely to have significant impact in many ways. Some key impacts are:

-          RPO applicability on CPP and OA in Gujarat – As of now, the RPO regulations of Gujarat are not notified with respect to CPP and OA. This was due to the pending court case. Now that the judgment is delivered, these regulations are likely to be made applicable to CPP and OA.

-          While the petitioners have the option to approach the Supreme Court, in our opinion this is likely to have minimal impact. This is because in a very similar case of the judgment of the Rajasthan HC, the Supreme Court has refused to give a stay on the judgment.

-          The judgment with respect to RPO on co-generation power is also likely to have far-reaching impact, as it clearly establishes the view that RPO can be made applicable on co-generation power. The court has held that as per Sec 86(1)(e) of the Electricity Act, co-generation should not be considered “stand-alone” because only on the basis of being co-gen it is “not the same as renewable sources of energy”

Our previous blog post on Rajasthan HC order for RPO enforcement can be read here.

And a previous post on ApTel order for Lloyd metals & Energy (RPO Petition) can be read here.

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