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JSA Prism | Energy | March 2024

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Consumption of power from fossil fuel-based co-generation is neither entitled for exemption nor set-off against applicable renewable purchase obligations

On February 20, 2024, the Appellate Tribunal for Electricity (“APTEL / Hon’ble Tribunal”) rendered its judgment in Tata Steel Ltd. v Odisha Electricity Regulatory Commission & Ors[1] inter-alia holding that: (a) consumption of power from fossil fuel-based co-generation plants are not entitled to exemption and/ or set-off against applicable renewable purchase obligations (“RPO”); and (b) neither Section 86(1)(e) nor Section 61(h) of the Electricity Act, 2003 (“Electricity Act”) expressly stipulate that co-generation and generation of electricity from renewable sources of energy should be promoted ‘equally’. Accordingly, APTEL upheld Odisha Electricity Regulatory Commission’s (“OERC”) order dated February 1, 2023 (“Impugned Order”)[2].

Further, APTEL has also held that the law down by its division bench in Century Rayon Ltd. v Maharashtra Electricity Regulatory Commission[3] (“Century Rayon Judgement”) and other judgments of APTEL which have followed the Century Rayon Judgement are per-incuriam.

Brief Facts

Tata Steel Limited (“Appellant”) owns and operates a 323 MW (three hundred and twenty-three megawatt) captive generating plant, out of which 258 MW (two hundred and fifty-eight megawatt) is a captive co-generation plant (based on waste heat recovery) (“Captive CGP”) and the rest 65 MW (sixty-five megawatt) is a coal-based captive generating plant.

Appellant invoked the jurisdiction of OERC under Regulations 16, 17 and 20 of the OERC (Procurement of Energy from Renewable Sources and its Compliance) Regulations, 2021 (“2021 Regulations”). Appellant inter alia submitted before the OERC that its Captive CGP captures the waste heat released from various processes and converts it into electricity, thereby minimizing the huge amount of pollution resulting from waste heat that would have released into the atmosphere. Appellant’s waste heat recovery system (“WHRS”) does not involve any supplementary burning of fuel and thereby helps in utilisation of resources and minimises use of fossil fuel for power generation.

Appellant inter alia prayed:

for a declaration and exemption that the Appellant was not an ‘obligated entity’, and was not required to fulfil the RPOtargets in relation to their Meramundali Unit for the period FY 2021 onwards, and for future periods, as long as generation from their Captive CGP was in excess of their presumptive RPO requirements for the same period;
To hold and declare that their Captive CGP is exempt from fulfilling its RPO from 2021 onwards under the 2021 Regulations; and
To declare that they were entitled to set-off their presumptive RPO targets qua the consumption from the 65 MW (sixty-five megawatt) coal-based captive generating plant against the electricity generated and consumed from their captive co-generation plants, irrespective of the fuel utilized in such plants.

By the Impugned Order, OERC disallowed the Appellant’s prayers. The Appellant was fastened with the liability of RPOs under Regulation 4.2 of the 2021 RPO Regulations qua consumption from their Captive CGP (which included 258 MW of captive co-generation) with RPOs with effect from the date notification of the 2021 Regulations, i.e. from February 15, 2022.

However, OERC granted the Appellant exemption from fulfilment of RPOs for consumption from its 258 MW (two hundred and fifty-eight megawatt) captive co-generation plant for the period 2015 onwards under the OERC (Procurement of Energy from Renewable Sources and its Compliances) Regulations, 2015 (“2015 RPO Regulations”).

Findings

APTEL, inter alia, held that:

Neither Section 86(1)(e) nor Section 61(h) of the Electricity Act expressly stipulate that co-generation and generation of electricity from renewable sources of energy should be promoted ‘equally’. Granting the relief sought by Appellant would mean adding the word ‘equally’ to Section 86(1)(e), amounting to judicial legislation, which is impermissible.
Since OERC has chosen to be guided by Clause 6.4 of the Tariff Policy in making the RPO Regulations, which are in the nature of a subordinate legislation, their validity cannot be examined in appellate proceedings under Section 111 of the Electricity Act.
The intention of the legislation must be found in the words used by the legislature itself. If the provision is unambiguous and if, from that provision, the legislative intent is clear, the court need not call into aid other rules of construction of statutes. The power conferred on State Electricity Regulatory Commissions (“SERCs”) under Section 86(1)(e) of the Electricity Act is confined only to renewable sources of energy, and not from co-generation.
“Co-generation”, as defined in Section 2(12) of the Electricity Act is only a process of generation of electricity and another form of energy and cannot be termed as a ‘source of electricity’ like renewable sources of energy.
In terms of Section 86(1)(e) of the Electricity Act, SERCs can promote fossil fuel-based co-generation plants by other measures such as facilitating sale of surplus electricity available with such co-generation plants to any person et al.
The manner in which the ‘source’ from which electricity should be purchased, as also the percentage of purchase from such ‘source’ to the total consumption of electricity in the area of a distribution licensee, is left to be determined by the SERCs either in the exercise of its regulatory power under Section 86(1)(e) of the Electricity Act, or by way of Regulations to be made under Section 181 of the Electricity Act. It is impermissible for APTEL to place any fetters on the exercise of powers or the discharge of regulatory functions by the SERCs.
None of the judgments relied on behalf of the Appellant, state why both “co-generation” and “generation of electricity from renewable sources of energy” should be promoted equally. The Century Rayon Judgement and the judgments following the Century Rayon Judgement do not consider this aspect. A decision cannot be relied upon as a precedent in support of a proposition that it did not decide. Further, a decision, which is neither founded on reasons nor it proceeds on a consideration of an issue, cannot be deemed to be a law declared to have a binding effect. Therefore, the decision in the Century Rayon Judgement and judgments following it are per incuriam in this regard.
Appellant’s consumption from fossil fuel-based cogeneration, cannot be set off against its RPO targets.
Regulations made by the SERCs are statutory in character and binding. The exercise of the power either to read down statutory regulations or to ignore them on the premise that they fall foul of or run contrary to the parent act amounts to exercise of the power of judicial review, which power cannot be exercised by APTEL.
While promoting generation of electricity from renewable sources of energy, it is open to the concerned SERC to promote one source of renewable energy over another or to fix different percentages for the minimum procurement from such sources. For instance, while promoting generation of electricity from renewable sources of energy, it is open to the SERC to fix a higher percentage, of the total consumption of a captive consumer, to be purchased from solar energy as compared to wind or hydel energy or vice versa.
In doing so, APTEL held that it is the judgement of the full bench in Lloyds Metal & Energy Ltd[4]. which is binding and not the law declared in the Century Rayon Judgement and the judgments of the 2 (two) member benches of APTEL following it. APTEL, reasoned that in light of the principle that larger bench judgments are binding on smaller benches, the Century Rayon Judgement and those following it are per incuriam.

Conclusion

APTEL, through this judgment has clarified that, neither Section 86(1)(e) nor Section 61(h) of the Electricity Act expressly stipulate that co-generation and generation of electricity from renewable sources of energy should be promoted ‘equally’. APTEL has further held that once SERCs have framed regulations not treating co-generation plants/ WHRS plants at par with renewable energy sources, the remedy available is only by seeking judicial review of such regulations. APTEL’s power under Section 111 of the Electricity Act does not extend to “read down regulations”. As a result of this judgment, a settled position for over a decade qua renewable purchase obligations of co-generation plants has been disturbed. The impact of the said judgment on the actions of the entities treating co-generation based waste heat recovery systems at par with renewable energy is worth keeping an eye on.

This Prism has been prepared along with:

Abhishek Munot
Partner

Kunal Kaul
Partner

Samikrith Rao
Senior Associate

Purvi Shrivastava
Associate

For more details, please contact [email protected]

[1] APTEL Judgment in Appeal No. 337 of 2023 dated February 20, 2024.

[2] OERC Order in Case No. 71 of 2022 dated February 1, 2023.

[3] Century Rayon Ltd v MERC (Appeal No. 57 of 2009 dated April 26, 2010).

[4] APTEL Judgment dated December 2, 2013, in Appeal No. 53 of 2012.

Tags APTEL, Energy, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates

JSA Prism | Power | March 2024

Please click here to download the Prism as PDF.

Indian Railways is not a ‘deemed distribution licensee’ under third proviso to Section 14 of the Electricity Act, 2003 as it does not supply/ sell electricity to consumers

The Appellate Tribunal for Electricity (“APTEL”) in a landmark ruling in West Bengal Electricity Distribution Company Ltd. and Ors. v Central Electricity Regulatory Commission and Ors. and batch[1] has held that the Indian Railways is not a ‘deemed distribution licensee’ under third proviso to Section 14 of the Electricity Act, 2003 (“Electricity Act”) as it does not supply/ sell electricity to consumers. Further, the Indian Railways is liable to pay cross subsidy surcharge (“CSS”) and additional surcharge (“ASC”) to distribution licensees, if it procures electricity from sources other than the concerned distribution licensees.

Brief Facts

The Ministry of Power (“MOP”) on May 6, 2014, issued a letter clarifying that the Indian Railways is a ‘deemed licensee’ under the third proviso to Section 14 of the Electricity Act. Subsequent thereto, Indian Railways filed petitions before various state electricity regulatory commissions (“SERCs”) claiming the status of a ‘deemed distribution licensee’.

Appeals were filed before the APTEL challenging the orders passed by the SERCs (“Impugned Orders”)[2] in the said petitions. On February 12, 2024, APTEL rendered its final Judgment while disposing of the said batch of appeals.

In doing so, APTEL held that the Indian Railways neither carries on any activity of ‘sale of electricity’ to third party consumers, nor discharges the obligations of a ‘deemed distribution licensee’ and Indian Railways’ entitlement for open access is only as a ‘consumer’ under the Electricity Act.

Issue

The issue in the batch of Appeals before APTEL was whether the Indian Railways is a ‘deemed distribution licensee’ under third proviso to Section 14 of the Electricity Act, 2003 and, if so, whether it is still required to is liable to pay additional / cross-subsidy surcharge.

Notable Findings of APTEL

APTEL, inter alia, held that the Indian Railways is not a ‘deemed distribution licensee’ for the following reasons:

The argument of Indian Railways that it is engaged in ‘sale of electricity’ by virtue of supplying power to vendors, contractors, agencies, and other entities in its area of operation is incorrect since:
- the act of Indian Railways of conveying electricity to vendors, contractors, agencies, and other entities in its area of operation at best constitutes re-distribution of electricity by a consumer among its own units.
- such re-distribution of electricity is nothing but self-consumption of electricity, at multiple locations, and such self-consumption does not constitute ‘distribution of electricity’ as contemplated under the Electricity Act.
- sale of electricity to a consumer is sine qua non for distribution of electricity by a distribution licensee, deemed or otherwise, under the Electricity Act.
- There is no element of ‘sale’ involved in the activities undertaken by the Indian Railways.
- Indian Railways shares a ‘jural relationship’ with vendors, contractors, agencies and other entities and there is no element of ‘supply’ or ‘distribution’ of electricity but is only use of electricity by or on behalf of the Railway Administration.
The Indian Railways does not have a ‘distribution system’ in terms of Section 2 (19) of the Electricity Act:
- ‘Electric traction equipment’ and ‘power supply and distribution installation’ under the Railways Act, 1989 (“RA Act”) do not constitute ‘distribution system’ under the Electricity Act as, no power is supplied to consumers.
- Section 18 (which enables the Central Government to require boundary marks or fences to be provided) and Section 2(31)(a) (which brings all lands located inside those boundaries within the definition of a ‘Railway’) of the RA Act only relates to the area within which Indian Railways is entitled to carry on its activities to the exclusion of all others. This area is not the ‘area of supply’ as defined under Section 2(3) of the Electricity
The end point of the ‘distribution system’ must be the point of connection to the installation of a ‘consumer’:

For a ‘distribution installation’ to fall within the definition of a ‘distribution system’ under Section 2(19) of the Electricity Act, it has to be connected to the point of installation of the consumer.

The Electricity Act does not envisage ‘Distribution’ de hors ‘Supply’:
- A distribution license is granted to a licensee not merely to ‘maintain and operate’ a distribution system but also to supply electricity, through such a system, to consumers in the area of supply of such a licensee.
- ‘Supply’ is defined in Section 2(70) of the of the Electricity Act to mean ‘sale of electricity’. In the absence of sale of electricity to a consumer at a price, the test of “supply of electricity” under Section 2(70) is not met.
The RA Act and the Electricity Act operate in different fields, in so far as distribution of electricity is concerned, and therefore, the 2 (two) Acts co-exist and can be harmoniously construed.

The non-obstante clause in Section 11 of the RA Act should be confined to the purposes referred to in clause (a) to (h) thereunder and cannot be expanded to read that Indian Railways has the power to distribute electricity to persons other than the railways. The RA Act is a prior special law, and the Electricity Act is a subsequent general law. A conjoint reading of Sections 173, 174 and 175 of the Electricity Act makes it clear that while the provisions of the RA Act would prevail in case of any inconsistency with respect to the provision of the Electricity Act, in the absence of any such inconsistency, the provisions of both the enactments would apply.

Conclusion

APTEL, through this landmark ruling has provided clarity on the criteria for qualifying as a ‘deemed distribution licensee’. APTEL has clarified that the Electricity Act does not envisage distribution without the concomitant obligation of supply (sale) of electricity to consumers. In other words, for a person to be ‘deemed distribution licensee’ there must be a distribution system and an element of supply of power to the consumer. Supply of power to its various units (located at one place or multiple places) would not qualify as ‘supply’ by a distribution licensee to a consumer. By the present judgment, APTEL has extended the principles settled by the Hon’ble Supreme Court in Sesa Sterlite Limited v Orrisa Electricity Regulatory Commission & Ors[3].

This Prism has been prepared by:

Abhishek Munot
Partner

Kunal Kaul
Partner

Purvi Shrivastava
Associate

For more details, please contact [email protected]

[1] APTEL Judgment in Appeal No. 276 of 2015 and batch dated February 12, 2024.

[2] CERC Order dated November 5, 2015 in Pet No. 197/MP/2015, OERC Order dated February 25, 2020 in Petition No. 55 of 2016, KSERC Order dated December 12, 2019 in OP. No. 31/19., MPERC Order dated May 5, 2021 Petition No. 11 of 2020, RERC Order dated April 23, 2019 Petition No. RERC-1452/19., MERC Order dated April 5, 2019 Petition No. 154 of 2019, HERC Order dated June 17, 2020 Petition No. HERC/PRO-11 of 2017, PSERC Order dated February 28, 2018 Petition No. 3 of 2017.

[3] (2014) 8 SCC 444

Tags APTEL, Electricity Act, India, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Power Sector, Railways

JSA advised India Grid Trust in acquiring a 300 MW solar power project in Rajasthan from ReNew Group

JSA advised India Grid Trust (IndiGrid) in acquiring a 300 MW solar power project location in Rajasthan from ReNew Group.

JSA acted as counsel to India Grid Trust (IndiGrid) in acquiring a 300 MW solar power project from ReNew Power group for a total enterprise value of INR 1,550 crores.

IndiGrid is India’s first and largest listed power sector infrastructure investment trust (InvIT), backed by KKR. IndiGrid has assets under management (AUM) of over INR 282 billion.

Renew Energy Global plc, an entity listed on Nasdaq, which is a global renewable company offering clean & green energy with a portfolio of 13.8 GW including Wind, Solar, Hybrid & Hydro Power and is the largest renewable energy company in India in terms of operational capacity.

Our transaction team comprised Lead Partner – Vishnu Sudarsan, Partners – Shashank Vikram Singh and Kartikeya GS, Associates – Ayushi Chaudhary and Siddhant Thakar, and Junior Associate – Ravneet Gill.

Our disputes team (on Regulatory Litigation) comprised Partner – Poonam Verma Sengupta and Senior Associate – Gayatri Aryan.

Our real estate team comprised Partners – Upendra Nath Sharma and Bharat Bhushan Sharma, Senior Associate – Mohit Aggarwal, and Junior Associate – Raunak Jain.

Tags JSA, Leading Law Firm, Leading Lawyers, Renewable Energy, Solar Power

MNRE Issues Bid Documents for Development of 4000 MW Offshore Wind Power Projects

JSA advised and assisted Ministry of New and Renewable Energy, Government of India and The World Bank on the preparation of the bid documents for the allocation of sea-bed lease rights for the development of offshore wind power projects.

Issued pursuant to the National Offshore Wind Policy, 2015 and Offshore Wind Energy Lease Rules, 2023, these bid documents for the first offshore wind power development projects to be undertaken in India, comprise a request for selection document, a concession agreement and separate lease agreements for both the survey and development stages of the project. The objective of this bidding process is to establish 4000 MW offshore wind energy as one of the green energy generation sources to contribute towards ‘Net Zero by 2070’ target of the country.

Deal Value: Over USD 1 billion

Our Transaction Team Comprised Joint Managing Partner – Amit Kapur and Partner – Kartikeya GS.

Tags Energy, JSA, Leading Law Firm, Leading Lawyers, Legal Updates

New exploration framework for minerals

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New exploration framework for minerals

Background

The Mines and Minerals (Development and Regulation) Act, 1957 (“MMDR Act”) was amended in 2023 to introduce the concept of an ‘exploration licence’. An exploration license is granted by the state government for undertaking reconnaissance operations, prospecting operations or both with respect to certain identified minerals such as lithium, gold, cobalt, and nickel (as provided in the newly introduced Seventh Schedule of the MMDR Act).

A key aspect of the framework is that the State Government is liable to pay to the exploration licensee a portion of the revenue share as discovered in the auction (the “auction premium”) payable to the State Government in respect of any mining lease granted in the area pursuant to the operations undertaken by the exploration licensee.

The New Regime

Pursuant to this legislative amendment, the Ministry of Mines, Government of India has, on January 21, 2024, notified amendments to the mineral law framework[1] in order to operationalise the regime for exploration licences.

1. Auction Framework

Pursuant to Section 10BA(9) of the MMDR Act (as introduced by the 2023 amendment), set out the detailed procedure and framework for grant of an exploration license:

The grantee will be selected by means of a descending reverse online electronic auction;
In order to participate in the auction, an applicant must: (a) be an Indian national or a company as defined in Section 2(20) of the Companies Act, 2013, and (b) have a net worth of INR 25,00,00,000 (Indian Rupees twenty five crore);
Applicants are required to quote, for the purpose of receiving payment from the State Government, a percentage share of the auction premium payable by the future mining lessee (subject to a cap to be stipulated by the State Government, which cap cannot be less than 25%); and
The bidder quoting the lowest percentage share is the winning bidder in the auction. Such bidder will be granted the exploration licence subject to furnishing the performance security, obtaining all permits required to commence operations and submitting the scheme for operations in accordance with law.

2. Payment to Exploration Licensee

The Mineral (Auction) Amendment Rules, 2024 stipulate that the State Government will pay to the exploration licensee, the percentage share as quoted by such licensee out of the auction premium deposited in a month by the future mining lessee. In this regard:

This amount is payable for entire term of the mining lease;
The exploration licensee and mining lessee may opt to enter into an agreement for payment of the above share as a lump-sum. In such a case, the exploration licensee is directly paid by the mining lessee (after deducting the same from the dues payable to the State Government);
In case an exploration licensee itself becomes the mining lessee, then it shall deposit the auction premium with the State Government after deducting the portion payable to it as the exploration licensee; and
If a mining lessee in respect of the explored area is not selected within the period specified, the State Government is liable to pay the exploration licensee an amount equivalent to 1 % of the expenditure incurred towards operations or INR 10,00,000 (Indian Rupees ten lakh) per month, whichever is higher, until the selection of such lessee or until the annulment of second attempt of auctioning the mining lease due to insufficient number of bidders. Such payment made to exploration licensee is adjusted from the amount that will be paid to it out of the auction premium to be deposited by the eventual mining lessee.

Conclusion

The proposed framework, which hews closely to the existing framework for auction of mining leases (and therefore offers a degree of familiarity to the industry) is expected to provide a conducive environment for incentivising exploration of minerals that are critical for new age electronics, transitioning to clean energy (solar, wind, electric vehicles), and to traditional sectors like infrastructure, defence, etc. The new regime is also expected to attract foreign investment and newer players to the sector, which will usher in requisite advanced technologies, finance and international expertise.

In particular, by providing a long-term recurring financial benefit to exploration licensees, the regime aims to address concerns of a perceived lack of sufficient incentive for undertaking exploration activities ever since the 2015 amendments to the MMDR Act did away with the transition from exploration to mining. This is of particular concern for deep seated minerals such as gold, silver, copper, zinc, etc., which are difficult and expensive to explore compared to surficial and bulk minerals and are resultantly relatively under-explored.

While, at first blush, there appear to be some gaps and grey areas in the regime (such as, for example, if the area held under separate prospecting licences or reconnaissance permits will be counted towards the caps on the area that can be held under an exploration licence), it is anticipated that the government will, as it has done in the past, address the same by means of timely further amendments.

This Prism has been prepared by:

Vishnu Sudarsan
Partner

Kartikeya GS
Partner

Ayushi Chaudhary
Associate

[1] Namely, the (a) the Mineral (Auction) Amendment Rules, 2024 (which amend the Mineral (Auction) Rules, 2015); (b) the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Amendment Rules, 2024 (which amend the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016); and (c) the Mineral Conservation and Development (Amendment) Rules, 2024 (which amend the Mineral Conservation and Development Rules, 2017.

Tags JSA, Leading Law Firm, Leading Lawyers, Mines and Minerals

India: Energy – Oil & Gas

India has a well-established upstream oil and gas industry with both state owned and private companies engaged in the sector as operators of oil and gas blocks.

As per the data issued by India’s Petroleum Planning and Analysis Cell (PPAC), which operates under the aegis of Government of India: for the period between December 2022- November 2023, the provisional natural gas production was at 35,614 million metric standard cubic meters and the provisional production of crude oil was at ~29.14 million metric tonnes . As per information provided by Directorate General of Hydrocarbons (DGH), Government of India, as on April 1, 2023, the initial in-place gas is about ~3,852 billion cubic meters with the estimated ultimate recovery quantities being ~1,830 BCM and the reserves being ~650 billion cubic meters. With respect to crude oil, as on April 1, 2022, the reserves were about 652 million metric tonnes.

Please click here to read the full article by Venkatesh Raman Prasad, Sweta Singh and Ayan Sinha.

Tags Energy, Government of India, JSA, Leading Law Firm, Leading Lawyers, Oil and Gas

JSA Prism | Energy | February 2024

Please click here to download the Prism as PDF.

Electricity (Amendment) Rules, 2024

The Electricity Rules, 2005 (“Rules”) underwent a comprehensive re-evaluation in 2023 whereby several amendments to key provisions were made. The reforms in the sector continue with the recent amendment to the Rules by way of the Electricity (Amendment) Rules, 2024 (“Amendment Rules“). Noteworthy among the amendments are the efforts to: (a) enable consumers to set up dedicated transmission lines; (b) rationalize the open access charges; and (c) address the disjunction between revenue and tariff structures.

Establishment, operation and maintenance of dedicated transmission lines

The Electricity Act, 2003 (“Act”) requires a license for establishing transmission lines[1]. However, an exemption to this provision was created for generating companies and persons setting up captive generating plants for establishing, operating or maintaining dedicated transmission lines by means of the Electricity (Removal of difficulty) Fifth Order, 2005[2]. This exemption saw a rise in demands by bulk consumers that they also be granted exemption from the requirement of obtaining transmission license for the purposes of setting-up dedicated transmission lines.
It was in light of these demands, the Ministry of Power (“MOP”) has inserted Rule 21 into the Rules exempting generating companies, persons setting up captive generating plants and energy storage systems, and consumers with a load of not less than 25 MW (twenty-five megawatt) in case of Inter State Transmission System and 10 MW (ten megawatt) in case of Intra State Transmission System, from obtaining a transmission license for setting-up dedicated transmission lines, provided that such company, person or consumer complies with the regulations, technical standards, guidelines and procedures issued under the provisions of the Act.

Revised open access charges

In order to rationalise open access charges, MOP has incorporated a new Rule 22 into the Rules. The said amendment rationalises the (a) the wheeling charges, (b) charges for use of STU networks by short-term open access consumers or temporary general network access (“GNA”) users, and (c) additional surcharge.
Rule 22(1) lays down the formula for the calculation of wheeling charges as:

Wheeling Charges =	Annual Revenue Requirement towards wheeling
	Energy Wheeled during the year

Rule 22(2) lays down the guidelines for determination of the charges for using network of State Transmission Utilities. According to this Rule, the charges for using State Transmission Utility network by the consumers availing short-term open access or temporary GNA, as the case may be, will not be more than 100 % of the charges levied on consumers using State Transmission Utility network on long-term basis or on GNA basis as the case may be.
Further, Rule 22(3) provides that the additional surcharge levied on any open access consumer will not be more than the per unit fixed-cost of power purchase of the distribution licensee concerned.
Additionally, the proviso to Rule 22(3) further states that for a person availing GNA or open access, the additional surcharge will be linearly reduced from the value in the year in which general network access or open access was granted, so that, if open access is continued to be availed by such person, the additional surcharge will be eliminated within 4 (four) years from the date of grant of the GNA or open access. The said Rule also provides that the additional surcharge will not be leviable on the open access consumers, to the extent that such open access consumer is maintaining the contract demand with the distribution licensee. Furthermore, the additional surcharge will be applicable only for the open access consumers who are or have been consumers of the concerned distribution licensee.

Gap between approved annual revenue requirement and estimated annual revenue from approved tariff.

The new Rule 23 provides that the tariff will be cost reflective and further stipulates that there will not be any revenue gap between approved annual revenue requirement and estimated annual revenue from approved tariff except under natural calamity conditions.
The proviso to Rule 23 states that such revenue gap, if any, shall not be more than 3 % of the approved annual revenue requirement. Furthermore, such gap along with the carrying costs at the base rate of the late payment surcharge as identified under the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 (“Late Payment Surcharge Rules”) will be liquidated subject to a maximum of 3 (three) equal yearly instalments from the next financial year.
Further, Rule 23 provides that any gap between the approved annual revenue requirement and estimated annual revenue from approved tariff existing on the date of notification of the Amendment Rules, along with the carrying costs at the base rate of late payment surcharge as identified under the Late Payment Surcharge Rules, will be liquidated subject to a maximum of 7 (seven) equal yearly instalments starting from the next financial year.

Conclusion

The Amendment Rules present a significant stride towards reforming the electricity sector with commendable efforts to enable setting up of dedicated transmission lines for bulk consumers and rationalizing open access charges.
The amendment qua dedicated transmission line seems to address the practical difficulties faced by bulk consumers to connect to the grid through a dedicated system owned by them. However, this amendment may not be in line with the provisions of the Act. It would be interesting to see how the interplay between the varied Rules and the Act plays out on stakeholder rights.
The rationalisation of open access charges, including wheeling charges and additional surcharge is a laudable initiative to facilitate uniformity of landed cost of electricity for consumers and to promote open access.
The requirement to maintain cost-reflective tariffs will ameliorate the financial health of the distribution utilities and improve the viability of the power sector by ensuring that the revenue generated from tariff aligns closely with the operational expenses, capital investments and maintenance costs incurred by distribution utilities.

This Prism has been prepared by:

Abhishek Munot
Partner

Megha Arora
Partner

Abhishek Rohatgi
Associate

For more details, please contact [email protected]

[1] Section 12, Electricity Act.

[2] Vide S.O 794(E) dated June 8, 2005, published in the Gazette of India, Extra., Pt. II, Sec. 3(ii), dated June 8, 2005.

Tags Electricity, Energy, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates

Rebuilding trust in climate action

The World Economic Forum 2024 at Davos has been an exciting and thought provoking conference in the face of a challenging global environment coupled with climate change challenges and the increasing deployment of Artificial Intelligence.

With the declarations made at the G20 Summit (September 2023) and COP-28 (December 2023), there is a sharp focus on establishing and implementing pathways to ‘just energy transition’ and ‘sustainable development’ while securing economic growth.

Please click here or refer to the below document to read the full article by Amit Kapur, published in The Hindu Business Line.

Tags Economic Growth, Energy, G20 Summit, JSA, Leading Law Firm, Leading Lawyers, World Economic Forum 2024

Evolving landscape Of EV regulations in India

India is currently witnessing an EV wave. The electric vehicles (EV) sector in India has witnessed significant year-on-year growth, with an increase in sale volumes to ~1.53 million EVs in the calendar year 2023 (as against ~1 million in 2022), which indicates a growth of 50% in sales.

The Indian EV sector is also expected to grow with a CAGR of 45% till 2030 showcasing that the momentum would continue in the years to come. It has also been interesting to witness new entrants in the segment (as distinct from the traditional OEMs) such as Ola, Ather, and others disrupting the EV ecosystem and playing a major role in spurring growth in the EV segment.

Please click here to read the full article by Venkatesh Raman Prasad, published in Financial Express.

Tags Energy, EV, JSA, Leading Law Firm, Leading Lawyers

Axis Bank Limited invests in INR 100 Crores NCDs issued by CESC Limited

JSA advised Axis Bank Limited (as the Investor) and IDBI Trusteeship Services Limited (as the Debenture Trustee) in connection with a financing by way of subscription to unlisted, secured non-convertible debentures (“NCDs”) issued by CESC Limited (“CESC”), for an amount of INR 100 crores.

CESC is a flagship company of the RP-Sanjiv Goenka Group, engaged in the business of generating and supplying electricity in Kolkata, Howrah and adjoining areas.

Khaitan & Co. acted as the legal counsel for CESC.

Our Transaction Team Comprised Lead Partner – Soumitra Majumdar, Partner – Abhishek Ray, and Associate – Aradhana Dey.