ELP Litigation Update:Prism Cement Limited vs Madhya Pradesh Electricity Regulatory

In this update we examine the recent judgment (attached)  passed by APTEL in the matter of Prism Cement Limited vs Madhya Pradesh Electricity Regulatory Commission & Ors. [Appeal No. 02 of 2019 and Appeal No. 179 of 2017; decided on 17.05.2019].

The said judgment,  in our view ,  will bring in a much-desired clarity as regards to the applicability of CSS (Cross Subsidy Surcharge)  on supply of electricity from generating plants/units of generating plants to users who agree to purchase equity in such generating plants.

The Ld. APTEL has vide the said judgment clarified that an owner of the CPP as well as its shareholders are not liable to pay any CSS  provided that the criteria in Rule 3(1)(a) of the Electricity Rules are met.

In brief the judgment can be summarized as under:-

• There is no bar on a generating plant which is initially set up as an Independent Power Producer and has a long term PPA to subsequently qualify as a Captive Generating Plant, till the time, it fulfills the conditions set forth in (ii);
• To qualify as a ‘captive generating plant’ under Section 2(8) read with Section 9 of the Electricity Act, 2003 and Rule 3 of the Electricity Rules, a power plant has to fulfil two conditions;
  • firstly, 26% of the ownership of the plant must be held by the captive user(s); and
  • secondly, 51% of the electricity generated in such plant, determined on annual basis, is to be consumed for captive use by the captive user.

• There is no bar in supply of balance 49% of electricity generated in a CGP (after consuming the 51% for self-use) to users who are not captive users of such power plant including to distribution licensees.
• An Owner of the CPP as well as its shareholders are not liable to pay any CSS provided that the criteria mentioned in (ii) above are met.

It would also be noteworthy to mention that ELP was instrumental in assisting BLA Power in the structuring of  Prism Cement’s investment in the company. APTEL’s decision has upheld the structuring.

Trust you find this alert an interesting read.