Hindalco, captive power producers move SC

Producers Association and Hindalco Industries have moved the Supreme Court against the levy of parallel operation (POC)/ grid support charges by transmission licensees on captive power plants, as directed by the Appellate Tribunal for Electricity.

It has alleged Aptel set a bad precedent, as its July 2 judgment has opened the doors for all the transmission licensees to levy POC/ GSC upon captive power producers (CPPs), and also allowed all the state electricity regulatory commissions to determine such charges, a direction contrary to the electricity laws.

A Bench led by Justice LN Rao issued notice to Madhya Pradesh Electricity Regulatory Commission, Madhya Pradesh Power Transmission Company, Hindalco Industries, Jaiprakash Associates, Ultra Tech Cement and others on the appeals by the association and other similarly placed companies alleging that the levy was being imposed for providing a fictitious service only to the CPPs, which had neither been identified nor quantified.

“The tribunal’s findings are illegal as POC/GSC is completely alien to the framework of the Electricity Act 2003, which neither provides any power for the transmission licensee to levy such charges, nor does it confer any jurisdiction upon the state electricity regulatory commission to determine the same,” it said.
“… the impugned judgment has set a bad precedent in the electricity sector, as the same would allow all the transmission licensees in the country to impose POC/GSC, which otherwise is illegal and contrary to the provisions of the Act, and would further allow the state electricity regulatory commissions to exercise their jurisdiction to determine such illegal charge,” the association stated.

Stating that the transmission of electricity is a licensed and a completely regulated business, the CPPs in their respective appeals submitted that a transmission licensee provides only “open access” to any generator or any other customer for use of the transmission lines/network and the Act does not contemplate any other service provided by such licensee qua use of its network. Hence, the only grid support provided by the transmission licensee is permitting “open access” in lieu of payment of transmission charges/ tariff only and no other cost/ revenue is permitted to be recovered by transmission licensees. “This aspect is also recognised in Section 62 of the Electricity Act, which has introduced a cost-plus approach to tariff based on deployment of assets (not in the principle of providing a service),” the association stated.

According to the appeal, the licensee operating in a cost plus (Section 62) regime is a revenue-neutral body and as such cannot have a claim beyond the tariff that is determined from time to time. Even when tariff is determined through a competitive bidding route (under Section 63), the Central Government guidelines require parties to bid for transmission charges, which, if accepted, is the totality of what the licensee will get (subject to change in law) for its transmission asset/ system, the association stated.

Aptel in its July judgment had held that the State Electricity Regulatory Commissions have power to regulate and determine the tariff in case of supply of electricity by a generating company to a distribution licensee and the levy of POC does not represent the price of electricity for sale to discom by the Captive Generating Plants (CGP). It is not correct to argue that since CGPs are exempted from surcharges, the levy of POC is impermissible or that the levy of POC amounts to circumventing the exemption-provision vis-à-vis surcharge. Both have different objectives and purposes, the tribunal said.

“The POC is not part of the tariff regime, nor a tax on the activity of generation, but payment for services rendered by the grid, it being covered, inter alia, by the authorization in Power Purchase Regulations, similar to transmission or wheeling charges paid for use of the systems of the transmission licensee… No doubt, there is no sale or purchase of electricity between the CPPs and the transmission licensee by reason only of grid connectivity. But there is an element of service provided by the grid, the POC being meant to consequently compensate the transmission licensee. The legislative aim of promotion of CGPs does not mean they are entitled as of right to unrestricted or free use of transmission systems of the licensee,” Aptel said in its order.

The Aptel had passed the order on a petition by various captive power plants (CPPs) operating in Madhya Pradesh.