APTEL Upholds Denial Of Captive Power Status Over 26% Ownership Rule

The Appellate Tribunal for Electricity (APTEL) has upheld the Haryana Electricity Regulatory Commission’s (HERC) decision denying captive power status to Piccadily Hotels Private Limited (PHPL). The tribunal held that PHPL failed to meet the statutory ownership requirement prescribed under the Electricity Rules, 2005.

The judgment was delivered on September 17, 2026, by Judicial Member Virender Bhat and Technical Member Ajay Talegaonkar. APTEL dismissed the appeal filed by Piccadily Agro Industries Ltd. (PAIL) and PHPL against the earlier HERC order. The dispute involved notices issued by Dakshin Haryana Bijli Vitran Nigam Limited (DHBVNL), requiring the companies to restore banking benefits amounting to Rs 68,03,220.

PAIL operates a 17 MW biomass-based co-generation power plant in Karnal, Haryana. Under a power banking agreement executed in 2020, surplus power of up to 5 MW was to be transferred to PHPL’s facility in Gurugram through the state transmission network.

DHBVNL subsequently questioned the captive status claimed for the arrangement. According to the distribution company, PHPL consumed only 37.24% of the electricity generated from the designated generating unit during financial year 2020–21. This was below the 51% minimum consumption requirement prescribed under Rule 3(1)(a)(ii) of the Electricity Rules, 2005.

Before APTEL, the appellants argued that the entire 17 MW generating plant operated by PAIL should be treated as a Captive Generating Plant. They also argued that the electricity consumption of PAIL and PHPL should be considered together for determining compliance with the captive power requirements.

DHBVNL maintained that captive status should be assessed based on the actual metered energy injected and consumed under the applicable contractual arrangements.

APTEL examined Rule 3 of the Electricity Rules, 2005, which provides two cumulative conditions for captive status. Captive users must hold at least 26% ownership in the generating plant and must consume at least 51% of the aggregate electricity generated annually.

The tribunal referred to the Supreme Court’s ruling in the Chhattisgarh State Power Distribution Co. Ltd. case. Based on the legal position established in that case, APTEL observed that where one company establishes a generating station and another corporate entity consumes electricity, the consuming company must hold at least 26% equity in the generating company to qualify as a captive user.

In the present case, PHPL held only 14.57% equity in PAIL. Since this was below the mandatory 26% threshold, APTEL concluded that PHPL could not claim captive user status. The tribunal therefore found it unnecessary to examine the separate electricity consumption requirement.

APTEL also noted that HERC had applied an incorrect methodology by notionally scaling PHPL’s equity ownership against a 5 MW unit using provisions applicable to Special Purpose Vehicles. However, the tribunal said that correcting this reasoning did not change the final outcome.

APTEL directed the appellants to pay the outstanding amount to DHBVNL within four weeks. The dues will also carry interest at the State Bank of India’s Marginal Cost of Funds-based Lending Rate (MCLR) plus 150 basis points, reflecting the tribunal’s direction concerning the time value of money.