MoP reveals proposed amendments related to captive power plants in Electricity Rules 2005

Ministry of Power recently announced proposed amendments in the electricity rules 2005 related to provisions regarding captive generating plants. The captive power producers body ICPPA expressed their woes against the proposed amendments.  According to ICPPA, these amendments are aimed at creating new ways of earning Cross Subsidy Surcharge (CSS) from captive users.

The amendments state that any captive user whose ownership of that plant is not exceeding 15% shall not qualify the power plant as a captive power plant. The proposed amendments have associated the ownership of the captive power plant with the eligibility of being a captive user.

In case the captive user fails to abide by the rules, then the electricity generated by the plant will be considered as if its a supply element by a generating company.

ICPPA secretary Rajiv Agrawal while interviewing with Economic Times said that “If any user is forced to draw lesser power share due to genuine reasons like the closure of its end-use plant for maintenance then the whole power generated in a year will be treated as non-captive and state income will charge CSS on it. It means all users of CPP will also have to pay the penalty, and thus the CPP may have to close down.”

The amendments suggest each captive user utilize 51% of the generated electricity from the captive plant and in case of group captive, each member should have a 26% equity share in the plant to be able to utilize the power from the plant.

“Captive plant set up by a company or any other body corporate, shall mean the issued and paid-up share capital in the form of equity share capital with voting rights (excluding equity share capital with differential voting rights) only as per the provisions of the Companies Act, 2013. In other cases, ownership shall mean proprietary interest and control over generating station or power plant, Provided further that for the purpose of assessing status as captive generating plant, a normative debt : equity ratio of 70:30 will be considered i.e. at least 26% of the equity base of 30% of capital employed, in the form of equity share capital with voting rights (excluding equity share capital with differential voting rights) needs to be invested by Captive user(s).”

In our opinion, the proposed amendments can bring stability in the electricity sector and increase the workability of DISCOMs across the country. By suggesting the eligibility of captive plants to be associated with the ownership in the plant the commission is asking the captive users to conduct rightful investments and be responsible towards the generation from the plant.

Read the document here.

Go to top