JSA successfully represented UltraTech Cement Limited (UTCL) and Amplus Dakshin Private Limited (ADPL) before RERC in proceedings (Petition no. 2047/2022) challenging the applicability of proportionality test to a single user captive generating plant setup by a Special Purpose Vehicle (SPV) having multiple equity shareholders.
On December 14, 2023, RERC has allowed UTCL and ADPL’s petition, and effectively overruled its earlier decision in Tesco Energy Two Pvt. Ltd. v. RVPNL (Tesco Order). RERC has held that:
- Rule 3 of the Electricity Rules, 2005 prescribes the minimum ownership (26% equity shareholding) and consumption (51% of the aggregate electricity) tests for a user of a CGP to qualify as its captive user.
- The equity shareholder(s) of a CGP, who do not consume energy generated from the CGP, will not impact the captive status of captive user(s) who fulfil the ownership and consumption test prescribed under Rule 3.
- Since UTCL owns 26% of the CGP and is consuming 100% of the power generated from the CGP, it qualifies as a captive user. Non-consumption of electricity by the other shareholder who holds 74% of the equity shareholding does not impact UTCL’s captive status.
- Proportionality test (i.e., consumption of electricity in proportion to its shareholding in the CGP) is not applicable since UTCL alone meets the ownership and consumption test under Rule 3, and the other shareholder consumes no energy generated by the CGP.
- In terms of the Supreme Court’s Judgment in Dakshin Gujarat Vij Company Ltdv. Gayatri Shakti Paper Ltd (2023 SCC OnLine SC 1276) it is not necessary for every shareholder of a CGP to consume electricity especially if the other shareholders are fulfilling the requirements of Rule 3.
Our Disputes Team Comprised Lead Partner – Abhishek Munot and Principal Associate – Tushar Nagar.
Abhishek is a part of Disputes group of JSA and anchors the Regulatory Practice of JSA in Western India. Abhishek handles sector specific commercial litigation, arbitration constitutional & administrative law litigation and regulatory proceedings before statutory authorities, tribunals and courts.