New Draft Regulations To Verify Captive Power Plant Status In Tamil Nadu

The Tamil Nadu Electricity Regulatory Commission has introduced a draft regulation aimed at verifying the status of captive generating plants and their consumers. This move is driven by the need to establish clear criteria and methods for determining whether a generating plant qualifies as a captive generating plant, which is a status that offers certain financial benefits, such as exemption from cross-subsidy surcharges.

A captive generating plant is defined as one primarily set up to generate electricity for the owner’s use. For a plant to maintain its captive status, it must meet specific requirements, including ownership criteria and consumption patterns. The regulations outline that a captive user must consume at least 51% of the electricity generated by the plant, and the ownership must be at least 26% held by the users consuming the power. These requirements are designed to prevent misuse and ensure that the benefits intended for captive users are not exploited.

The Commission has the authority to oversee and verify the data related to the captive status of generating plants. It appoints the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) to collect and verify this data. The process involves an annual review of the shareholding patterns and consumption details provided by the generating plants and their consumers. This data is crucial to ensure that the generating plants meet the criteria set out in the regulations.

Significantly, the Honorable Supreme Court has played a role in clarifying these regulations. In a recent ruling, the court upheld that the Commission is empowered to enforce these criteria and that any deviation from the required standards would result in the loss of captive status. This ruling emphasizes that any transfer of ownership or changes in shareholding must still comply with the established criteria to maintain the plant’s captive status.

The regulations also address the issue of “gaming,” where entities might attempt to manipulate the system to gain undue benefits. For instance, a minor shareholder disproportionately consuming electricity from the plant can no longer qualify for the benefits accorded to captive users. The Supreme Court has mandated strict adherence to the proportionality test to prevent such misuse and protect the interests of all stakeholders, including distribution licensees.

The draft regulations also provide detailed procedures for the annual verification process. This includes the submission of documents such as shareholding certificates, balance sheets, and consumption data. These documents must be certified by authorized professionals, ensuring transparency and accountability in the verification process.

Moreover, the regulations stipulate that if a plant fails to meet the criteria, it will lose its captive status, and the consumers will be required to pay applicable charges, including cross-subsidy surcharges. This provision ensures that only those genuinely qualifying as captive users receive the benefits intended by the regulations.

The Tamil Nadu Electricity Regulatory Commission invites comments and suggestions from stakeholders on the draft regulations. This participatory approach allows for a comprehensive review and incorporation of feedback before the final regulations are enforced. Interested parties have until mid-July 2024 to submit their views, ensuring that the regulations are robust and reflect the needs and concerns of all involved.

These draft regulations mark a significant step towards more structured and fair verification of captive generating plants, aiming to streamline processes and prevent exploitation. By clearly defining the criteria and ensuring rigorous verification, the Commission aims to uphold the integrity of the captive power generation system in Tamil Nadu.

Please view the document here for more details.