APTEL Clarifies Captive Power Plant Compliance Rules and Cross-Subsidy Dispute

The Appellate Tribunal for Electricity (APTEL) has overturned a Tamil Nadu Electricity Regulatory Commission (TNERC) order from July 13, 2023, in a case involving captive power plants operated by Chettinad Cement Corporation Pvt. Ltd.

Chettinad Cement, which runs three cement manufacturing units in Tamil Nadu at Karikkali (Dindigul), Puliyur (Karur), and Ariyalur (Perambalur), also operates coal-based captive power plants at these sites with a combined capacity of 135 MW. The dispute revolved around whether electricity generation and consumption from multiple captive power plants could be aggregated to meet the requirement under Rule 3 of the Electricity Rules, 2005, which mandates that at least 51 percent of electricity generated from captive plants must be consumed by the captive user.

TNERC had ruled that the consumption could be aggregated across the three plants, a decision challenged by the Appellant, who argued that each plant should be evaluated independently.

The Appellate Tribunal upheld TNERC’s interpretation, affirming that aggregation of electricity generation and consumption across multiple plants owned by the same entity is valid under the rules. This ensures compliance even if individual plants do not meet the 51 percent consumption threshold independently.

However, the Tribunal also addressed the Appellant’s claim for cross-subsidy surcharge (CSS) for FY 2014-15 and 2015-16, which had been dismissed by TNERC without determining whether the claim was time-barred. The Tribunal directed TNERC to reopen the case and adjudicate the limitation issue within four months, ensuring that both parties are given a fair opportunity to present their arguments.

Until the limitation issue is resolved, the Tribunal has prohibited the Appellant from taking any coercive measures to recover CSS from Chettinad Cement. This ruling clarifies the regulatory interpretation of captive power plant aggregation and establishes an important precedent for cases involving multi-plant setups. It also underscores the need for timely resolution of legal and regulatory disputes in the electricity sector.