KERC’s New Guidelines For Determining Captive Power Plant Status In Karnataka

The Karnataka Electricity Regulatory Commission (KERC) has issued a procedure for determining the “captive status” of electricity generating plants within the state. This is important because the Electricity Act of 2003 and related rules provide certain benefits to plants that qualify as “captive generating plants” (CGPs) and their users.   

The crux of the matter lies in defining what qualifies a power plant as a CGP. According to the Electricity Act of 2003, a CGP is a plant set up by someone to generate electricity primarily for their own use. This includes plants set up by cooperative societies or associations for their members.  The Electricity Rules of 2005 further specify conditions related to ownership and electricity consumption.  Generally, this means that at least 26% of the plant’s ownership must be held by the users, and at least 51% of the generated electricity must be consumed by those users annually.   

These rules also address scenarios where a plant is owned by a Special Purpose Vehicle (SPV) and situations involving multiple owners.  In the case of multiple owners (an “association of persons”), the rules specify how the electricity consumption should be proportional to their ownership shares.   

The KERC’s involvement stems from its responsibility to regulate the electricity sector in Karnataka.  The commission has the authority to determine whether a plant meets the criteria for captive status.  This includes the power to ensure that the rules are followed and to address any misuse, such as disproportionate electricity consumption by a minority owner.   

Recent court rulings, including those from the Supreme Court of India, have further clarified the interpretation and application of these rules.  These rulings have touched on aspects like ownership transfers, the continuous requirement of maintaining ownership and consumption thresholds throughout the year, and the definition of “association of persons.”   

To implement these regulations, the KERC has outlined a procedure for data collection, scrutiny, and verification of captive status.  This process involves the distribution licensee (DISCOM) in whose area the CGP is located.  The DISCOM is responsible for collecting and scrutinizing the necessary information and submitting a report to the KERC.