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Electricity & Energy LawSupreme Court of India

Chhattisgarh State Power Distribution Company Ltd vs Chhattisgarh State Electricity Regulatory Commission

Civil AppealDecided 12 May 2022
Civil Appeal Nos. 2578-2579 of 2008
L. Nageswara Rao · B.R. Gavai · A.S. Bopanna

Background

A company (SBPIL) that had set up a captive power plant sought permission from the state electricity regulator to supply a large share of the electricity it generated to its sister concern (SBMPL), which held 27.6% of SBPIL's shares, through the power distribution utility's grid. The distribution utility opposed this, arguing the sister concern's planned consumption (about 58%) was disproportionately higher than its ownership share, and that this wasn't genuine "captive" (own) use. The regulator and the Appellate Tribunal for Electricity both ruled in favour of allowing the arrangement, prompting the distribution company to appeal to the Supreme Court.

Decision Breakdown

The Court examined Section 9 and Section 2(8) of the Electricity Act (defining "captive generating plant") along with Rule 3 of the Electricity Rules, 2005, which require captive users to jointly hold at least 26% ownership and jointly consume at least 51% of the electricity generated. It held that the term "person" under the Act is broad enough to include an association of companies, so a sister concern holding 27.6% equity qualifies as a "captive user." Since the combined consumption of both companies exceeded 51% of the generated power, both statutory conditions were satisfied, regardless of any mismatch between individual ownership share and individual consumption share. The Court also relied on the National Electricity Policy's stated purpose of encouraging captive generation for cost-effective power and industrial growth, and dismissed the utility's appeal, upholding the regulator's and Tribunal's orders.

Lesson Learnt

Under India's electricity law, a group of related companies can qualify as "captive users" of a jointly-owned power plant as long as their combined ownership and combined consumption meet the statutory 26%/51% thresholds: an individual company's consumption need not exactly match its individual ownership share.

Chhattisgarh State Power Distribution Company Ltd vs Chhattisgarh State Electricity Regulatory Commission – Legal Case Shots | LegalAware