No Additional Surcharge for Captive Power Projects, Rules APTEL in Maharashtra

In September 2018, MERC imposed ₹1.25/kWh on users of group captive power


The Appellate Tribunal for Electricity (APTEL) has ruled that no additional surcharge can be levied on captive users, a ruling that sets aside another order passed by Maharashtra Electricity Regulatory Commission (MERC)  in September 2018.

Earlier, JSW Steel Limited and Sai Wardha Power Generation Limited, petitioners, in this case, had argued that the procedure with which the MERC levied the additional surcharge of ₹1.25 (~$0.018)/kWh on users of group captive projects was restricted to carrying out a mid-term performance review. Therefore, the commission could not have levied the surcharge.

APTEL noted the argument and said that mid-term review is just a comparison between the actual operational performance (factual) versus the approved forecast, and the MERC has ignored its regulations by levying the surcharge when in the forum of regulators which includes the MERC, there was common understanding that additional surcharge is not leviable for captive users/consumers.

The petitioners have also argued that the levy of additional surcharge is in contravention of the provisions of the Electricity Act as the MERC has distinguished between captive users and group captive.

The petitioners also cited state commission’s tariff order of 2016 where it had mentioned that the captive users are not liable to pay an additional surcharge. They argued that the essential condition for the sale of electricity, which requires the existence of two persons, one being a seller and another being purchaser, is absent in the case of group captive users.

APTEL differed with the MERC’s opinion that there are different types of captive users and said, “There cannot be any distinction between an individual captive consumer and group captive consumers or original captive consumers and converted captive consumers.”

The petitioner argued that the surcharge could not be “on charges of wheeling” as the wheeling charges are for the use of the distribution system owned by the distribution licensee. In this case, captive users are connected by the state transmission utility and not the distribution system.

The MERC had argued that the levy of additional surcharge on captive consumers is permitted. However, it was exempted for a certain period. Therefore, this cannot be the basis for not introducing such a levy of additional surcharge.

It further argued that the levy of additional surcharge was imposed as the commission felt that it was a case of stranded capacity on account of open access. MERC said, “Through additional surcharge, the only fixed cost of stranded generating capacity attributable to open access consumers is being recovered so that it should not get loaded on the other consumers.”

To this, APTEL replied that if a consumer is not a captive consumer, he has to pay the additional surcharge. However, it is not inclined to accept that captive consumers have to pay an additional surcharge on wheeling charges when they switch over from distribution licensee. Therefore there is no need to deliberate on the facts and figures concerning stranded capacity.

Recently, in a similar order, the MERC rejected a petition filed by Shree Cement requesting amendments to Distribution Open Access Regulations, 2016 and allowing the use of open access facility and banking of power from a co-located renewable energy power project simultaneously.