before the maharashtra electricity … 58 42/order-69 71 73 of 2016... · petition of century rayon...

Order in Case Nos 69, 71, 73 of 2016

Before the

MAHARASHTRA ELECTRICITY REGULATORY COMMISSION

World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai 400005

Tel. 022 22163964/65/69 Fax 22163976

Email: [email protected]

Website: www.mercindia.org.in / www. merc.gov.in

CASE No. 69 of 2016

In the matter of

Petition of Century Rayon for amendment of Renewable Purchase Obligation

Regulations, 2016 so as to exempt Captive Users of Fossil Fuel-based Co-Generation

Plants

M/s Century Rayon Petitioner

Appearance

For the Petitioner : Shri. Prakash Shah, Adv.

Shri. Ajit M. Patil

CASE No. 71 of 2016

Petition of Captive Power Producers Association for review of Renewable Purchase

Obligation Regulations, 2016 so as to exempt Captive Users of Fossil Fuel-based Co-

Generation Plants

Captive Power Producers Association Petitioner

Appearance

For the Petitioner : Shri.Vikas Nevagi, Adv

Shri. Vikas Patangia

CASE No 73 of 2016

Petition of Uttam Galva Steels Ltd. for amendment of Renewable Purchase Obligation

Regulations, 2016 so as to exempt Captive Users of Fossil Fuel-based Co-Generation

Plants

Uttam Galva Steels Limited Petitioner

Appearance


For the Petitioner : Shri. Abhishek Khare, Adv.

Shri. M.L. Agarwal

For Authorized Consumer Representative : Dr. Ashok Pendse, TBIA

Coram

Shri. Azeez M. Khan, Member

Shri. Deepak Lad, Member

ORDER

Date: 28 March, 2018

These Petitions essentially seek amendment of the MERC (Renewable Purchase Obligation

(RPO), its Compliance and Implementation of Renewable Energy Certificate Framework)

(‘RPO Regulations’), 2016 so as to exempt captive users of power from fossil fuel-based Co-

Generation Plants from applicability of RPO. Hence this common Order.

CASE No. 69 of 2016

1. M/s Century Rayon (CR) (a Division of Century Textiles & Industries Ltd.) has filed

a Petition on 27 April, 2016, citing Regulation 92 of the MERC (Conduct of

Business) Regulations, 2004, with the following prayers:

a. “This Hon’ble Commission be pleased to suitably modify the RPO

Regulations to maintain status quo and exempt captive user(s) consuming

power from grid connected fossil fuel based co-generation plants, from

applicability of Renewable Purchase Obligation target and other related

conditions as specified in these Regulations and make suitable and

consequential modifications to the said Regulations;

b. In the alternate, this Hon’ble Commission be pleased to exercise the

power under Regulation 16 to relax/waive Renewable Purchase Obligation for

captive users consuming power from co-generation having capacity of more

than 5 MW generating electricity based on conventional fossil fuel…”

2. The Petition states as follows:

a) CR is engaged, inter alia, in diverse industrial sectors like Textiles, Cement,

Tea, Tyres, etc. It owns a Co-generation Captive Generating Plant (CGP) based on

conventional fossil fuel with installed capacity of more than 5 MW. This Co-

generation CGP is situated at Shahad, Distict Thane, Maharashtra.


b) The RPO Regulations, 2016 define the term “Obligated Entity” to mean a

Distribution Licensee, a user owning a CGP and an Open Access (OA) Consumer in

Maharashtra required to comply with the RPO subject to fulfillment of condition in

Regulation 5. Regulation 3.2 provides that the Regulations shall apply to captive users

and OA consumers in Maharashtra, subject to the conditions in Regulation 5.

c) Regulation 7 provides the percentage of Obligated Entity to procure electricity

from eligible Renewable Energy (RE) source.

d) Regulation 5.1 provides that the percentage specified in Regulation 7.1 shall

be applicable to all OA consumers and captive users subject to them owning a grid-

connected CGP based on conventional fossil fuel with installed capacity of 5 MW and

above and consuming electricity generated from such Plant for their own use.

e) In view of the above, CR being the owner of a Co-generation CGP based on

conventional fossil fuel with installed capacity of more than 5 MW is subjected to

RPO, i.e. required to purchase electricity from eligible RE sources to the extent of the

percentage of its consumption met through such fossil fuel-based captive source.

f) This Petition seeks reconsideration of the RPO Regulations, 2016 to the extent

that fossil fuel Co-generators are required to procure electricity generated from

eligible RE sources.

g) In the alternative and without prejudice to the above, this Petition may be

treated as an Application under Regulation 16 of the RPO Regulations, 2016, and the

obligation to procure electricity from the eligible RE sources be waived to the Co-

generation captive users using fossil fuel.

h) The draft RPO Regulations published by the Commission provided for the

exemption from any RPO on the captive users consuming power from grid-connected

fossil fuel-based Co-generation Plants with installed capacity of 5 MW and above.

The RPO Regulations, 2016 as finally published by this Commission on 30 March,

2016 provide for purchase of RE power by parties like CR, who is a captive user

consuming power from its own grid-connected Co-generation CGP based on

conventional fossil fuel with installed capacity of 5 MW and above.

i) Proviso to Regulation 11.3 of the draft RPO Regulations provided that captive

users consuming power from grid-connected fossil fuel-based Co-generation Plants

are exempt from RPO targets and specified conditions. This proviso in the draft RPO

Regulations was omitted in the finally notified RPO Regulation, 2016, apparently

based on the revised Tariff Policy of 2016. However, the revised Tariff Policy of 2016

cannot override Section 86(1)(e) of the Electricity Act (EA), 2003 and the binding

judicial orders of the Appellate Tribunal for Electricity (ATE).


j) In view of the above, CR did not file any submission in response to the draft

RPO Regulations as there was complete exemption provided to CR. The final RPO

Regulations as published by the Commission imposed RPO on CR without providing

any opportunity to it to make suggestions / objections to the revised draft Regulations

in which exemption proposed was withdrawn. CR is therefore entitled to maintain this

Application.

k) The RPO Regulations 2016,to the extent that they impose RPO on a captive

user having Co-generation CGP based on conventional fossil fuel with installed

capacity of 5 MW and above, are contrary and inconsistent with the provisions of the

EA, 2003 and, in particular, Section 86(1)(e).

l) The ATE, in its Judgment dated 26 April,2010 in CR’s own case and in its

subsequent Orders in other Cases, upon interpretation of Section 86(1)(e) of the EA,

2003 has held that:

“Under the Scheme of the Act, both renewable source of energy and

cogeneration power plant, are equally entitled to be promoted by State

Commission through the suitable methods and suitable directions, in view of

the fact that cogeneration plants, who provide many number of benefits to

environment as well as to the public at large, are to be entitled to be treated at

par with the other renewable energy sources.”

m) It is a settled position in law that the Order of the ATE is binding on this

Commission. This Commission rejected the contention of CR that it is not required to

purchase the electricity from RE source on the ground that CRis using conventional

fossil fuel. ATE has accepted the contention of CR held that it is not required to

purchase electricity from RE sources.

n) It is an admitted position that in view of the Order of ATE and in particular its

interpretation of Section 86(1)(e) of the EA, 2003 in CR’s own case, this Commission

suitably modified the earlier Regulations to remove the RPO on Co-generators like

CR.

o) The impugned RPO Regulations are clearly contrary to not only the binding

Orders of the ATE but also contrary to the provisions of the EA, 2003.

p) This Commission did not invite any objections or suggestions from the

affected party like CRnor afforded any opportunity of hearing before making the

impugned RPORegulations, which affect all Co-generators like in this case. The

purpose of publication of the draft RPO Regulations was to invite suggestions and

objections. The purpose was defeated in so far as the Co-generators are concerned.

q) Section 86 of EA, 2003, provides for the functions to be discharged by the

State Commission. Section 86(1)(e) is interpreted by the ATE in CR’s own case,


holding that the co-generation and generation of electricity from RE sources are both

required to be promoted by the State Commission. The distinction sought to be made

by different State Commissions was negated by the ATE.

r) On 26 April 2010, the ATE in Appeal No. 57 of 2009, passed a detailed

Judgment laying down the duties of the Electricity Regulatory Commissions in the

matter of promotion of co-generation and generation of electricity from renewable

sources of energy by providing various measures under Section 86(1)(e). Portions of

the Judgment, which have a vital bearing on the mandate of the Commission in

making the RPO Framework and relevant for the purpose of the present Petition, are

set out hereunder:

(i) As per Section 86(1)(e), there are two categories of Generators,

namely, (1) Co-generators (2) Generators of electricity through renewable

sources of energy. It is clear from this Section that both these categories must

be promoted by the State Commission;

(ii) Under the scheme of the EA, 2003, both renewable sources of energy

and Co-generation Plants are equally entitled to be promoted by State

Commission through suitable methods and suitable directions, in view of the

fact that Co-generation Plants, which provide many benefits to environment as

well as to the public at large, are to be entitled to be treated at par with the

other RE sources;

(iii) The intention of the legislature is to clearly promote co-generation in

this industry generally irrespective of the nature of the fuel used for such co-

generation and not co-generation or generation from RE sources alone.

In conclusion, ATE, clearly held that the Appeal before it being generic in

nature, its conclusions will be equally applicable to all co-generation based

captive consumers who may be using any fuel.

s) The ATE in its Judgment in Appeal Nos. 112, 130 and 136 of 2014, dated 1

October, 2014, in the matter of India Glycols Ltd V/s Uttarakhand Electricity

Regulatory Commission (UERC), held that

“The Co-generation based Captive Power Plant/Captive user cannot be

fastened with renewable purchase obligation as provided under UERC

(Compliance of RPO) Regulations, 2010, as subsequently, amended by UERC

(Compliance of RPO) (First Amendment) Regulations, 2013.

24) The State Commission should have granted relief and exempted the Co-

generation based Captive Power Plants/Captive users as per the judgment,

dated 26.4.2010, of this ATE in Appeal No. 57 of 2009, immediately on coming

to the knowledge of the same and without waiting for the amendment of the

relevant State RPO Regulations, 2010 (Principal Regulations) ……it was


incumbent upon the State Commission to consider the submissions of the

Appellants and other like co-generation based Captive Power Plants/Captive

users and to grant relief to them. Since, the State Commission has failed in its

duty to do the same; we are constrained to rectify the illegality committed by

the State Commission without remanding the matter and again burden the

State Commission with the same exercise.

26) ATE further ordered that the relief granted herein shall be applicable

to all Co-generation based Captive Power Plants/Captive users as they are

also covered by the newly amended definition of ‘Obligated entity’ and shall

not be confined to the Appellants before us.”

t) The aforesaid orders are valid, binding and in force on the State Electricity

Regulatory Commissions.

CASE No. 71 of 2016

3. Captive Power Producers Association (CPPA) has filed a Petition on 29 April, 2016

citing Regulation 85 of the MERC (Conduct of Business) Regulations, 2004 and

Section 94 of EA, 2003 for review and amendment of Regulation 11.3 of the RPO

Regulations, 2016.

4. The prayers of CPPA are as follows:

“The Applicant humbly pray to the Hon’ble Commission to Review the RPO

Regulations 2016 dated 30th

March 2016 by retaining the proviso as

mentioned in Regulation 11.3 of Draft RPO Regulations, 2016 “provided

further that the captive user(s) consuming power from grid connected fossil

fuel based co-generation plants, are exempted from applicability of Renewable

Purchase Obligation target and other related conditions as specified in these

Regulations.” in Regulation 11.3 of the RPO Regulation, 2016

In view of the facts and circumstances mentioned above and in interest of

justice by exercising powers of Hon’ble commission as per Regulation 85 of

Maharashtra Regulatory Electricity Commission (Conduct of Business)

Regulations 2004 and as per Section 94 of Electricity Act, 2003 to review the

RPO Regulation, 2016 as prayed above….”


a) CPPA is an Association of Industries in Maharashtra having CGPs at their

industries in the State fulfilling their energy requirements through captively produced

power. In these Power Plants, which are coal, liquid fuel or gas based, heat is co-

generated as a by-product or industrial waste and is harnessed for further power,

steam generation and other industrial uses. The heat co-generated is used for

industrial purposes / running steam turbines which are in turn used for further power


generation. The CPPA members’ CGPs have been recognized as Co-generation Plants

by the appropriate authorities.

b) On 24 December, 2015 the Commission published draft RPO Regulations. In

the interactive consultation held thereon, the Commission directed all the stakeholders

to submit their objections/suggestions by 19 January, 2016.

c) In Regulation no. 11.3 of the draft RPO Regulations, 2016, Commission

retained the following exemption to Captive users consuming power from Co-

generation from applicability of RPO targets as given below-

“Captive user(s) consuming power from grid connected fossil fuel based co-

generation plants, are exempted from applicability of RPO target.”

Hence, Captive user(s) consuming power from Co-generation have not submitted any

objections and suggestions on the draft Regulation.

d) The Commission, on 30 March 2016, in exercise of powers conferred under

Sections 61, 66, 86(1)(e) and 181 of the EA, 2003, notified the RPO Regulations,

2016.

e) CPPA is presenting this Petition under Regulation 85 of the MERC (Conduct

of Business) Regulations, 2004 as well as Section 94 of the EA, 2003 seeking review

of the RPO Regulations 2016,as set out below.

f) The EA, 2003 is passed to consolidate the laws relating to electricity for

promotion of efficient and environmentally benign policies and for matters connected

therewith or incidental thereto. The EA, 2003 provides for appointment of State

Electricity Regulatory Commissions (SERCs) for carrying out various regulatory and

advisory functions under the EA, 2003. The EA, 2003 requires SERCs to promote

certain processes and sources of generation of energy and to draft Regulations for

making suitable measures for such promotion. Section 86(1e) of the EA, 2003

provides as follows:-

86. Functions of State Commission:(1) The State Commission shall discharge

the following functions, namely :-

…(e) promote cogeneration and generation of electricity from renewable

resources of energy by providing suitable measures for connectivity with the

grid and sale of electricity to any person, and also specify, for purchase of

electricity from such sources, a percentage of the total consumption of

electricity in the area of distribution licensee;”

g) Co-generation is a process. It means generation of more than one form of

energy (including electricity) from a single source of energy. It is not specific to any


particular source or any particular type of source. Co-generation has been defined in

Section 2(12) of the EA, 2003 as

“a process which simultaneously produces two or more forms of useful energy

(including electricity)”.

h) The EA, 2003 clearly recognizes the importance of encouraging industries to

use all the outputs from a co-generation process in an effective manner so as to lead to

effective use of fossil fuels which are fast depleting and save energy. Undisputedly, it

is an admitted fact that co-generation based on fossil fuel has tremendous scope and

significant contribution to the benefit of environment by way of curtailing emissions

and hence needs to be encouraged. The Co-generation Plants have thermal efficiency

in excess of 70 % compared to conventional Plants having efficiency of 30 to 34 %,

or combined cycle Power Plants having thermal efficiency of 50 to 55%. This is an

extremely efficient way of meeting power and steam requirements of the industry

with fuel saving capability of the order of 20 to 25 %. The scope of reducing emission

into environment is much larger and more significant in case of co-generation than all

renewable sources put together. In such a scenario, the Commission’s proposal of

overlooking promotion of co-generation or restrict promotion of co-generation to one

particular process or feedstock lacks justification.

i) The RPO Regulations were published on the website of the Commission on 30

March, 2016. There was no public hearing held on the revised RPO Regulations after

getting suggestions/objections from the stakeholders by the Commission before such

publication.

j) On 26 April, 2010, the ATE, in Appeal No. 57 of 2009, in the matter of

Century Rayon Vs. Maharashtra Regulatory Commission & Ors. passed a detailed

Judgment and Order laying down the duties of SERCs in the matter of promotion of

co-generation and generation of electricity from Renewable Sources of Energy by

providing various measures under Section 86(1) (e) of the EA, 2003. [The relevant

conclusions of the ATE and their implications cited by CPPA are along the lines

already set out at para. 2(r) earlier in this Order.]

k) In the ATE Full Bench Judgment in Appeal No 53 of 2012 dated 02.12.2013

in Lloyd Metal & Energy Ltd Vs. MERC& Ors., the limited question referred to the

Full Bench of the tribunal was “Whether the Distribution Licensee could be fastened

with the obligation to purchase a percentage of its consumption from co-generation

irrespective of the fuel used under Section 86(1)(e) of the EA, 2003”. The Full Bench

of ATE has not considered and disturbed the ratio of the ATE order dated 26 April,

2010 exempting RPO on Co-generation. The Rajasthan High Court also considered a

related issue. The Petition in Rajasthan High Court was on applicability of RPO on

CGP and was not on applicability of RPO to Co-generation CGPs. Co-generation

CGPs are exempted from RPO according to Rajasthan Electricity Regulatory

Commission (RERC) RPO Regulations.


l) [CPPA has also cited the ATE its Judgment in Appeal No 112, 130 and 136 of

2014, dated 01.10.2014 in India Glycols Ltd V/s UERC, which is quoted at para. 2(s)

earlier in this Order.]

m) Gujarat Electricity Regulatory Commission (GERC) filed a Review Petition

against ATE’s order dated 26 April, 2010, which was rejected by ATE vide its Order

dated 17th

April 2013 (IA 262 of 2012) holding that GERC is not “the aggrieved

party” and there is delay in filing the Petition. GERC has filed appeal before the

Supreme Court, which is pending (CA No 6797 of 2013). Hence, the ATE’s Order

dated 26April, 2010 is still valid and in force and is binding on SERCs.

n) On 28 January, 2016, Ministry of Power (MoP), empowered under Section 3

of the EA, 2003, notified the amended National Tariff Policy. Clause 6.4 reads thus:

“Provided that cogeneration from sources other than renewable sources shall

not be excluded from the applicability of RPOs.”

o) Even in the light of the law as enunciated by the ATE, the RPO Regulations,

2016 have withdrawn the exemption on Captive user(s) consuming power from co-

generation from applicability of RPO targets. The relevant provisions of the

Regulations require review. The Judgment of the ATE could not be produced by

CPPA with its objections/suggestions as the Regulation was passed after the

objections /suggestions were submitted through the website since there was no

hearing on the objections/suggestions before the Regulations were made by order

dated 30 March, 2016 and in the draft RPO Regulations, the fossil fuel-based Co-

generation Plants were exempted from applicability of RPO targets. In any event,

having regard to totality of the circumstances, there are sufficient reasons for a review

of the order of the Commission making the said Regulations.

p) Co-generation means a process which simultaneously produces two or more

forms of useful energy (including electricity). The EA, 2003 encourages the industry,

firstly, to captively produce electricity for its own use and, secondly, to produce such

electricity through the process of co-generation since it leads to effective use of fossil

fuels available in limited supply and thereby conserves energy. The EA, 2003,

therefore, recognizes the need to promote co-generation by treating the same on par

with renewable sources of energy. The State Commissions are required to accordingly

promote both (1) co-generation and (2) generation of electricity through renewable

sources and are empowered to frame Regulations for specifying suitable measures of

such promotion. The EA, 2003 also requires that the State Commissions, in discharge

of their functions, be guided by the National Electricity Policy (NEP) and Tariff

Policy published under Section 3(2) of the EA, 2003. The NEP requires co-generation

projects to be encouraged as much as RE sources. Inspite of the mandate of the EA,

2003 and the NEP, the Commission has omitted to encourage co-generation. The

Regulations, to the extent they do not so provide, are ultra vires the EA, 2003 and also


violative of fundamental and constitutional rights of CPPA members who own CGPs

in co-generation mode, on the following amongst other grounds:-

A. (A1). That it is elementary principle of administrative law that any

Regulations, rule etc. must be made after publishing the draft and inviting

suggestions and objections of the interested persons. As a corollary, some new

provisions in the final published Rule/ Regulations cannot be added which was

not there in the draft nor can something which conferred substantial rights be

deleted in the final version. This is precisely what is done in the instant case

and the Commission has materially changed the provisions of the draft as

published. This is gross violation of Administrative and Constitutional Law.

(A2). That the process of rule/ Regulation-making and/or decision making by

the Commission necessarily involves observance of principles of natural

justice. The impugned Regulations are notified in breach of principles of

natural justice, since no opportunity of being heard was given toCPPA or any

of its members.

(A3). That it is cardinal principle of natural justice that any action or decision

which entails civil consequences (here the entitlement of exemption from

being an obligatory entity for RPO obligation is being withdrawn which is

adverse and prejudicial to CPPA) must precede observance of natural justice.

On this count also, the Regulations need to be relaxedin the terms under

Regulations 11.3 and the status quo ante restored.

(A4). The Regulations discriminate against co-generation generally in as

much as they simply provide for measures of promotion of renewable sources

of energy and do not have any provisions which would promote co-generation

of electricity. The Commission ought to have promoted electricity generated

from co-generation and given it similar treatment with RE in the Regulations.

Section 86(1) (e) of the EA, 2003 places co-generation on equal footing with

generation of electricity from renewable sources of energy. As provided in

Section 86 (1) (e) of the EA, 2003, co-generation also needs to be promoted

along with RE, which the Commission has overlooked and ignored.

B. (B1) Section 86(1) (e) of the EA, 2003 mandates the State Commission to

promote co-generation along with generation of electricity through Renewable

Sources of Energy. Clearly the intention of the Legislature is to promote co-

generation in the industry without reference to the fuel used for such co-

generation. Section 2(12) of the EA, 2003 defines co-generation as

“a process, which simultaneously produces two or more forms of useful

energy (including electricity)”.

The definition does not refer to any fuel, or conventional or non-conventional

source of energy.


(B2) The term “cogeneration” so defined generally is used only in Sections

61(h) and 86(1)(e) of the EA, 2003 providing for the functions of the State

Commission, to “promote cogeneration”.

(B3) The intention of the legislature is to clearly promote co-generation in the

industry generally and not co-generation from RE Sources alone. If the

intention of the legislature was to promote only co-generation from renewable

sources of energy, there was no requirement to mention the word

“cogeneration” at all in Section 86(1)(e), or indeed define it in Section 2(12)

since ‘generation’ includes ‘cogeneration’ and the use of the word

‘cogeneration’ separately in the Section would be redundant.

C. (C1) The State Commission is enjoined upon to seek guidance from the

NEP published under Section 3 of the EA, 2003 and others, all of which

require encouragement of co-generation in the industry without reference to

any type of fuel, or the nature of source of energy, namely, whether

conventional or non-conventional, as may be seen from the following:

The NEP, 2005 in Clause 5.12.3 provides as follows:-

“Industries in which both process heat and electricity are needed are well

suited for cogeneration of electricity. A significant potential for

cogeneration exist in the country, particularly in the sugar industry. SERCs

may promote arrangements between the co-generator and the concerned

distribution licensee for purchase of surplus power from such plants.

Cogeneration system also needs to be encouraged in the overall interest of

energy efficiency and also grid stability.”

The Tariff Policy dated 28 January, 2016 published by MoP pursuant to

Section 3 of the EA, 2003), in Clauses 4 (d), provides as follows:-

“4 (d) Promote competition, efficiency in operations and improvement in

quality of supply.”

D. (D1) There are many documents in the form of contemporanea expositio

available on record to show the State’s primary intention to promote all forms

of co-generation. Some of the documents are referred to below

(D2) MoP Resolution dated 6 November, 1996 provides as follows:

“1.3 It is generally recognized that industry in general and a process industry

in particular needs energy in more than one form and if the energy

requirements and supply to the industrial units are carefully planned the

overall efficiency of a very high order is possible to achieve. With the

combined objectives of promoting better utilisation of precious energy

resources in the industrial activities and creation of additional power

generation capacity in the system, encouragement to co-generation plants in

the country is being suggested.”

(D3) In the above context, it specifies the following definition of co-

generation.


“2.1 A cogeneration facility is defined as one which simultaneously produces

two ore more forms of useful energy such as electric power and steam, electric

power and shaft (mechanical) power etc. Cogeneration facilities, due to their

ability to utilize the available energy in more than one form, use significantly

less fuel input to produce electricity, steam, shaft power or other forms of

energy than would be needed to produce them separately. Thus by achieving

higher efficiency, cogeneration facilities can make a significant contribution

to energy conservation.”

(D4) The MoP Resolution further provides as follows:

“3. Objectives of the Policy

3.1. As electricity and heat are fundamental inputs to most of the industrial

activities the present policy strives to achieve the dual objectives of achieving

higher efficiency in fuel use in the industry as well as the availability of

surplus electricity to the State grid, by combining power and heat generation

for industrial use.”

E. (E1) The report of the Working Group on Power for Eleventh Plan dated

15February, 2007 constituted by the MoP recommended the following in

Section 1.14.5 (B):

“Co-generation power is to be given “Must Run” status. Co-generation power

should be treated at par with non-conventional energy sources such as wind

energy. Therefore, no backing down of the co-generation power be resorted to

by the off taking distribution utilities except in events of force majeure.”

F. ATE and various other State Commissions (six SERCs) have equated co-

generation (irrespective of the source of fuel) with RE and exempted Captive

User (s) consuming power from Co-generation Plants from applicability of

RPO targets.

(q) The ATE has in Appeal No.57 of 2009 involving a similar Regulation of this

Commission observed as follows:-

“9. A plain reading of the section would provide for discharge of the following

functions;

(i)Promote co-generation;

(ii) Promote generation of electricity from the renewable sources of energy;

(iii) Provide suitable measures for connectivity with the grid;

(iv) For sale of electricity to any person;

(v) Specify the percentage of total consumption of electricity in the area of the

distribution licensee for purchase of electricity produced by the co-generator

and generation through renewable source of energy.

19. According to the learned counsel for the State Commission, the intent

of the Electricity Act with regard to section 86(1)(e) of the Act is to promote

the production of electricity only from renewable sources and not from fossil

fuel. As stated earlier, this cannot be the correct interpretation.


20. As a matter of fact, the reading of the section 86(1)(e) along with the

other sections, including the definition Section and the materials placed on

record by the Appellant would clearly establish that the intention of the

legislature is to promote both co-generation irrespective of the usage of fuel

as well as the generation of electricity from renewable source of energy.

21. It is no doubt true that the generation of electricity from renewable

sources is to be promoted as per section 86(1)(e) of the Act. It is equally true

that co-generation of electricity is also to be promoted as it gives several

benefits to the society at large. Various records produced by the Appellant

would also indicate that the co-generation produces both electricity and heat

and as such it can achieve the efficiency of up to 90% giving energy saving

between 15-40% when compared with the separate production of electricity

from conventional power stations and production of steam from boiler. It is

adopting most efficient way to use fuel. The benefits that are derived from co-

generation are many. Co-generation helps save energy costs, improves energy

security of supply, and creates jobs. Co-generation can be based on a wide

variety of fuels and individual installations may be designed to accept more

than one fuel. Co-generation is the most efficient way of generating electricity,

heat and cooling from a given amount of fuel. Co-generation helps reduce

CO2 emissions significantly. It also reduces investments into electricity

transmission capacity, avoids transmission losses and ensures security of high

quality power supply. Because of these benefits being derived from the

production of electricity through co-generation plant, the legislature intended

to use the word “to promote” both the co-generation as well as the generation

from the renewable source of energy.

a. It cannot be disputed that the energy efficiency of the co-generation

plant is almost double than the normal power plants because normal power

plants release residual energy in the atmosphere, whereas the co-generation

plant utilizes the energy to the maximum possible. It is established, as

mentioned earlier, that the energy efficiency of the normal power plant is

about 50 to 60% whereas the energy efficiency of the co-generation plant is

about 80-85%.

b. Internationally, the Governments have been promoting co-generation

of energy so that the precious fuel is not wasted and the environment is

protected. Even the municipalities/local authorities have been encouraging the

simultaneous use of the residual wastes. It is for this reason that the Electricity

Act 2003 has cast obligation on the State Commissions to promote co-

generation as well as the generation of electricity through renewable energy

sources.

c. This aspect can be viewed from yet another angle also. As mentioned

earlier, we are called upon to decide the question as to whether co-generation

projects based on fossil fuel are not entitled to be treated at par with the

eligible renewable energy sources for renewable projects obligation. To

answer this question we have to see the scheme of the Electricity Act as well

as the National Electricity Policy. Under the Act there are three categories of

sources of energy each being accorded with a different treatment namely –


(i) Conventional Power Plants such as Thermal, Hydro and

Nuclear Power Plants;

(ii) Renewal source of energy;

(iii) Non-conventional plants including co-generation plants.

d. Under the scheme of the Act and the policies framed thereunder, both

renewable source of energy and co-generation power plant, are equally

entitled to be promoted by suitable methods as provided under section

86(1)(e) of the Act. In other words, non-conventional power plants including

co-generation plants are entitled to be treated at par with the other renewable

energy sources for the RPS regime.

e. In the light of the above, when we notice the meaning of the Section

86(1)(e) of the Act, it is clear that it mandates the State Commissions to

promote both the categories (1) co-generation plant (2) generation of

electricity through renewable source of energy. The perusal of this section in

conjunction with section 2(12) of the Act clearly indicate that the intention of

the legislature is to promote co-generation in the industry without reference to

the fuel used for such co-generation. In other words, the intention of the

legislature is to clearly promote co-generation in the industry generally and

not co-generation from renewable energy sources alone.”

On the basis of these conclusions, the ATE has held as follows:

39. These documents as well as the relevant provisions of the Act and the

National Electricity Policy and National Electricity Plan and Tariff Policy

would make it clear that it is mandatory on the part of the State Commission

to give encouragement to co-generation in the industry without reference to

any type of fuel or the nature of source of energy whether conventional or

non-conventional.

44. In this case, as discussed above, we find that in section 86(1)(e) as well

as definition of section 2(12), the language is very clear and unambiguous and

it gives out the manifold mandate to the State Commission to promote both the

categories: one is co-generation as defined in section 2(12) irrespective of the

fuel used and another is generation of the electricity from the renewable

source of energy. The summary of the conclusions of the ATE relevant for the

purpose of present application are quoted in paragraphs 13 hereinabove. As

mentioned hereinabove, the Hon’ble ATE had made it clear that their

conclusions in the said Appeal will be equally applicable to all cogeneration

based captive consumers who may be using any fuel.

The Judgment of ATE dated 26 April, 2010 in case of Century Rayon

interpreting Section 86(1)(e) has held that the co-generation and generation of

electricity from renewable sources are two different things and they are to be

separately promoted. As a corollary, on the Co-generation Plants, an

obligation to purchase RE cannot be imposed. This Judgment was sought to be

reviewed by GERC and that application has been dismissed and the matter is

pending before the Supreme Court.

G. ATE in another Judgment dated 1 October, 2014 had considered the same

issue relating to enforceability of RPO obligation against Co-generation CGPs

and has held that Co-generation CGPs cannot be fastened with RPO.


H. The RERC has categorized co-generation as RE without reference to the fuel

used for such co-generation:

“Another submission is for promoting waste heat recovery based power project

and prayed it to be classified as RE power project. The Commission states that

waste heat recovery from the industrial plant has already been classified as

cogeneration project and thus falls under the category of RE power projects. Any

consumption of electricity from such cogeneration qualify to be of R.E. as part of

obligation.

…Rajasthan Cement Manufacturers Association made their submission stating

that since CPP is not a consumer as defined in the Act hence SERC is not

empowered to cast such obligation and requested that the generation of

electricity by waste heat recovery/cogeneration should qualify as RE. Similar

submission was made by Birla Corporation Ltd. The Commission has held that

as dealt in earlier para and further clarifies that the electricity generation of

waste heat recovery/cogeneration has been considered and categorized as RE.

The Industries may exploit this potential to meet their obligatory requirement in

part or full.”

The RERC has provided that Co-generation CGPs are exempt from RPO and

non-Co-generation CGPs were not exempt, and this Order has been upheld by

Rajasthan High Court.

I. The mandate of Section 3(1) of the EA, 2003 requires Central Government to

make the National Tariff Policy. The Tariff Policy is not binding and enforceable

but only a guiding factor to be taken into account by SERCs.

J. (J1) The interpretation of Section 86 (i) (e) by the ATE is binding on the

Commission and it cannot take a contrary view or make Rules/ Regulations

which are contrary to the Judgments/ Orders of ATE .The Judgment of ATE is

binding upon this Commission with greater force since it is inter-parties and

cannot be questioned or re-opened by the Commission in a collateral or indirect

manner.

(J2) The Judicial and Quasi-Judicial discipline mandates and Constitutional

Scheme and Rule of Law require that the hierarchical institutions and bodies

maintain the harmony and comity of decisions and jurisdictions. The

Commission, therefore, could not have and ought not to take any decision or

make Rules, Regulations in teeth of the ATE decisions.

(J3) Considering the object sought to be achieved by the EA, 2003, which

requires both co-generation (as defined under the EA, 2003) as well as generation

of electricity by renewable sources to be grouped together for promotion, the

classification of renewable sources on the one hand and captive users in co-

generation mode on the other made by the said Regulations is not based on

intelligible differentia having rational relation to the said object and offends the

mandate of Article 14 of the Constitution of India.


K. The Commission has powers to review its decisions, orders, directions etc.

with the same powers as vested in the Civil Court (as provided in Regulation 85

of the MERC (Conduct of Business) Regulations, 2004). The Commission

therefore has powers u/s 114 of Code of Civil Procedure read with Order 47 of

the Code. The Regulations are required to be reviewed in so far as RPO qua

captive users consuming power from grid-connected fossil fuel-based Co-

generation Plants are concerned as there is a mistake/ error apparent on face of

record in that it has overlooked the binding Judgment of ATE in case of Century

Rayon Vs. MERC.

L. In the Regulations relating to RPO obligation on captive users consuming

power from grid-connected fossil fuel-based Co-generation Plants, there is clear

error apparent on record and there is otherwise sufficient reason to review the

same.

M. The National Tariff Policy made by Central Government is only a guiding

factor and not a binding charter against the Judgment of ATE, particularly an

inter party Judgment which is binding on MERC, and the Regulation relating to

RPO on CGP users consuming power from grid-connected fossil fuel-based Co-

generation Plants is clearly in teeth of such binding Judgment which is “law

declared” for the Commission.

6. The Commission had issued notice to Maharashtra Energy Development Agency

(MEDA), and asked the Petitioners to furnish their Petitions and submissions to

MEDA also. In its response dated 13 July, 2016, MEDA has stated that, in the RPO

Regulations, 2016, the Commission has excluded the clause exempting Captive Users

consuming power from grid-connected fossil fuel-based Co-generation Plants from

RPO based on the provisions of the National Tariff Policy, 2016 dated 28 January,

2016. Hence, MEDA is of the view that the RPO Regulations, 2016 are in line with

the National Tariff Policy, 2016 and, accordingly, RPO may be applied to the Captive

Users consuming power from grid-connected fossil fuel-based Co-generation Plants.

CASE No. 73 of 2016

7. M/s Uttam Galva Steels Limited (UGSL) has filed a Petition on 10 May, 2016 under

Regulation 85 of MERC (Conduct of Business) Regulations, 2004 for modification of

the RPO Regulations, 2016 to exempt captive users consuming power from fossil

fuel-based Co-generation Plants from applicability of RPO targets.

8. The Prayers of UGSL are as follows:

“This Hon’ble Commission be pleased to exercise the power under Regulation

18 to suitably modify the RPO Regulations, 2016 to maintain status quo and

exempt captive user(s) consuming power from grid connected fossil fuel based

co-generation plants, from applicability of Renewable Purchase Obligation

target and other related conditions as specified in these Regulations and make

suitable and consequential modifications to the said Regulations;…”



a) UGSL is engaged in processing of steel products. UGSL currently owns a Co-

generation CGP based on conventional fossil fuel with installed capacity of more than

5 MW at Village Donvat, Dist Raigad, Maharashtra.

b) The RPO Regulations, 2016 define the term “Obligated Entity” to mean a

Distribution Licensee, a user owning a CGP and an OA Consumer in Maharashtra

required to comply with the RPO subject to fulfillment of conditions in Regulation 5.

Regulation 3.2 provides that the Regulations shall apply to captive users and OA

consumers Maharashtra, subject to the conditions in Regulation 5.

c) Regulation 7 provides the percentage of Obligated Entity to procure electricity

from eligible RE source.

d) Regulation 5.1 provides that the percentage specified in Regulation 7.1 shall

be applicable to all OA consumers and captive users within Maharashtra subject to

such OA consumers and captive user owning a grid-connected CGP based on

conventional fossil fuel with installed capacity of 5 MW and above and consuming

electricity generated from such plant for its own use.

e) In view of the above, UGSL, being the owner of a co-generation CGP based

on conventional fossil fuel with installed capacity of more than 5 MW, shall be

subjected to RPO i.e. required to purchase electricity from eligible RE sources to the

extent of the percentage of its consumption met through such fossil fuel-based captive

source.

f) This Petition is filed by UGSL under Regulation 85 of the MERC (Conduct of

Business) Regulations, 2004 and Regulation 18 of the RPO Regulations 2016 seeking

to suitably modify the RPO Regulations, 2016 to the extent that fossil fuel Co-

generators are required to procure electricity /generated from eligible RE sources. In

the alternative and without prejudice to the above, this Petition may be treated as an

Application under Regulation 18 of the RPO Regulations and the obligation to

procure electricity from the eligible RE sources be suitably modified for the captive

users consuming power from fossil fuel-based Co-generation Plant in the

circumstances below.

g) The draft RPO Regulations published by this Commission provided for the

exemption from any RPO on the captive user(s) consuming power from grid-

connected fossil fuel-based Co-generation Plants with installed capacity of 5 MW and

above. However, the final RPO Regulations, 2016 published in the Official Gazette

on 30 March 2016 provides for purchase of RE power by parties like UGSL, who is a

captive user consuming power from its own grid-connected Co-generation-based CGP

based on conventional fossil fuel with installed capacity of 5 MW and above.


h) The proviso to Regulation 11.3 of the draft RPO Regulations provided that

captive users consuming power from grid-connected fossil fuel-based Co-generation

Plants are exempt from applicability of RPO targets and specified conditions. It

appears that this proviso was omitted in the RPO Regulation, 2016 based on the

revised Tariff Policy of 2016. The revised Tariff Policy of 2016 cannot override

Section 86(1)(e) of the EA, 2003 and the binding judicial orders of the ATE.

i) In view of the above, UGSL did not file any submission in response to the

draft RPO Regulations as there complete exemption was provided to UGSL in the

draft RPO Regulations, but the final RPO Regulations, 2016 imposed RPO on UGSL.

There was no public hearing on the revised RPO Regulations after getting

suggestions/objections from the stakeholders by the Commission before such

publication. UGSL is therefore entitled to maintain this Application.

j) The RPO Regulations, 2016, to the extent that they impose RPO on the

captive users like UGSL having Co-generation CGP based on conventional fossil fuel

with installed capacity of 5 MW and above, are contrary to and inconsistent with the

provisions of the EA, 2003, and in particular Section 86(1)(e). In this regard, there are

binding orders of the ATE.

k) On 26 April, 2010, the ATE, in Appeal No. 57 of 2009, in the matter of

Century Rayon Vs. Maharashtra Regulatory Commission & Ors. passed a detailed

Judgment and Order laying down the duties of SERCs in the matter of promotion of

co-generation and generation of electricity from Renewable Sources of Energy by

providing various measures under Section 86(1) (e) of the EA, 2003. [The relevant

conclusions of the ATE and their implications cited by CPPA are along the lines set

out at para. 2(r) earlier in this Order.] It is an admitted position that, in view of the

Order of the ATE and in particular its interpretation of Section 86(1)(e) of the EA,

2003 in the Century Rayon case, this Commission suitably modified the Regulations

to remove the RPO on the Co-generators like UGSL.

l) The impugned RPO Regulations are clearly contrary to not only the binding

Orders of the ATE but also contrary to the provisions of the EA, 2003.

m) This Commission did not invite any objections or suggestions from the

affected parties like UGSL nor afforded any opportunity of hearing before making the

impugned RPO Regulations, which affect all Co-generators like UGSL in this case.

The purpose of publication of the draft RPO Regulations was to invite suggestion and

objections, if any, to the draft RPO Regulations. The aforesaid purpose was defeated

in so far as the Co-generators like UGSL are concerned.

n) Section 86 of EA, 2003 provides for the function to be discharged by the State

Commission. Clause (e) of Section 86(1) is interpreted by the ATE, which has held

that the co-generation and generation of electricity from renewable sources are both


required to be promoted by the State Commission. The distinction sought to be made

by different State Commissions was negated by the ATE.

o) The term “co-generation” so defined generally is used only in Sections 61(h)

and 86(1)(e) of the EA, 2003 providing for the function of the State Commission,

inter alia, to “promote co-generation”.

p) The intention of the legislature is to clearly promote co-generation in the

industry generally and not co-generation from RE Sources alone. If the intention was

to promote only co-generation from renewable sources of energy, there was no

requirement to mention the word “co-generation” at all in Section 86(1)(e) of the EA,

2003, or indeed define the same in Section 2(12) since ‘generation’ includes ‘co-

generation’ and the use of the word ‘co-generation’ separately in the Section would

be redundant.

q) The ATE Full Bench in Appeal No 53 of 2012, dated 02.12.2013 in the matter

of Lloyd Metal & Energy Ltd Vs. MERC& Ors. passed a detailed Judgment and

Order. The limited question which was referred to the Full Bench was “Whether the

Distribution Licensee could be fastened with the obligation to purchase a percentage

of its consumption from co-generation irrespective of the fuel used under Section

86(1)(e) of the EA, 2003”. Full Bench of ATE has not considered and disturbed the

ratio of the ATE Order dated 26 April, 2010 exempting RPO on Co-generation.

r) [UGSL has also cited the ATE Judgment in Appeal No 112, 130 and 136 of

2014, dated 01.10.2014 in India Glycols Ltd V/s UERC, which is quoted at para. 2(s)

earlier in this Order and is hence not repeated here.]

s) The Judgment of ATE dated 26 April, 2010 in case of Century Rayon

interpreting Section 86(1)(e) has clearly held that the co-generation and generation of

electricity from renewable sources are two different things and they are to be

separately promoted. As a corollary, on the Co-generation Plants an obligation to

purchase RE cannot be imposed.

t) ATE Judgment dated 1 October, 2014 had considered the same issue relating

to enforceability of RPO obligation against Co-generation CGPs and has held that

Co-generation CGPs cannot be fastened with RPO. The National Tariff Policy is not

binding and enforceable but only a guiding factor to be taken into account by SERCs.

However, the aforesaid ATE Orders are valid, binding and in force on the SERCs.

10. At the hearing held on 10 November, 2016 the Commission heard the Petitioners

together since similar issues have been raised in these Cases.

10.1 Case No. 69 of 2016

a) CR sought that the RPO Regulations, 2016 be modified to bring them in line

with the earlier Regulations of 2010, or that the requirement that fossil fuel-based Co-


generators procure electricity from eligible RE sources be relaxed by the Commission

invoking its powers under Regulation 16 to waive such requirement. The proviso to

Regulation 11.3 of the draft RPO Regulations published by the Commission for

public comments provided for such exemption from RPO for captive users consuming

power from grid-connected fossil-fuel-based Co-generation Plants with installed

capacity of 5 MW and above. However, the final RPO Regulations, 2016 notified on

30 March 2016 removed this exemption.

b) CR referred to the Judgment of the ATE dated 26 April, 2010 in Appeal No 57

of 2009, which held that Co-generation Plants were entitled to be promoted by the

State Commissions. In the operative paras. 44 and 45, the ATE stated that, under the

scheme of the EA, 2003, both RE and Co-Generation (even if not based on RE or

non-fossil fuels) are equally entitled to be promoted by the State Commissions

through suitable methods and directions, and that Co-generation Plants provide

several benefits for the environment as well as to the public at large and are entitled to

be treated at par with other RE sources. Following that Judgment, the Commission

accordingly incorporated an exemption from RPO in its RPO Regulations, 2010 in

June, 2012. The GERC filed a Petition No 1311 of 2012 for review of this Judgment.

However, in its Judgment dated 17 April, 2013, the ATE did not condone the delay in

filing the Review Petition. It also held that GERC was not an aggrieved person and

that, therefore, the Review Petition was not maintainable. GERC has filed an appeal

before the Supreme Court, which is pending. There is no stay on the Judgment of the

ATE dated 26 April, 2010, and hence it is still valid, in force and is binding on the

State Commissions.

c) CR stated further that, in its full-Bench Judgment dated 2 December, 2013 in

Appeal No 53 of 2012 (filed by Lloyds Metal against the Commission’s interim Order

dated 26 December, 2011), the ATE held that the State Commission may promote

fossil fuel-based Co-Generation by other means such as facilitating sale of surplus

energy, in the interest of promoting energy efficiency and grid security. The ATE did

not disturb its earlier ruling regarding RPO not being applied to Co-generation Plants.

Hence, the present RPO Regulations, 2016 imposing RPO on Co-generation Plants is

in conflict with the ATE Judgment dated 26 April, 2010 in Appeal No. 57 of 2009.

CR stated that most of the State Commissions are following the ATE Judgment in

Appeal No 57 of 2009.

d) CR stated that the exemption from RPO was removed in the final RPO

Regulations, 2016 based on the revised Tariff Policy notified by Govt. of India in

January, 2016. However, the Tariff Policy 2016 cannot override Section 86(1)(e) of

the EA, 2003 and the various judicial Orders of the ATE.

e) To a query of the Commission, CR stated that, in a recent Bombay High Court

Judgment, it has been held that, while notifying final Regulations, the State

Commission is not bound to hear the parties again if they differ from the previously

published draft Regulations. However, where the Tariff Policy, which is only one of


the guiding elements for a Commission under the EA, 2003, differs from a judicial

Order of the ATE, the latter has to be given preference. If any Regulations are framed

which are in conflict with the Judgments of ATE and notwithstanding the powers of

the ATE under the EA, 2003, then there is a clear error of law. The appeal filed by

GERC is pending before the Supreme Court in CA No 6797 of 2013. There is no stay

on the Judgment of ATE dated 26 April, 2010 in Appeal No 57 of 2009 and hence it

is still valid and in force. Therefore, under the doctrine of precedence, the ATE’s

decision is to be followed.

f) CR also cited the RERC’s RPO Regulations, 2010 and amendment dated 30 May,

2014 excluding CGPs based on fossil fuel-based Co-Generation from RPO. The

Rajasthan High Court, by Order dated 31 August, 2012, had dismissed various Writ

Petitions challenging RPO on Captive users. However, that matter was in respect of

CGPs, and the High Court did not look into the issue of applicability of RPO targets

on fossil fuel-based Co-Generation, because RERC itself had excluded them from

RPO targets. Hence, there is no conflict between the High Court and ATE Judgments.

In any case, the Rajasthan High Court Judgment does not constitute a precedent,

considering the Supreme Court Judgments (on the nature and how precedents are to

be applied) in the Cases of Bhavnagar University and Bharat Petroleum (copies

submitted to the Commission). The ATE had expressly examined the issue, and that

issue was not before the Rajasthan High Court. Therefore, the ATE Judgment is still

valid in law.

g) CR submitted that, in the alternative, the Commission may invoke its power under

Regulation 16 of the RPO Regulations, 2016 to relax or waive any provision suo moto

or on an application to exempt its Plant from RPO.

h) As regards the issue of Regulations vis-à-vis ATE Judgments, Dr. Ashok Pendse of

Thane-Belapur Industries Association (TBIA), an Authorised Consumer

Representative, stated that the Supreme Court, in the Case of Power Trading

Corporation on an Order of the Central Electricity Regulatory Commission (CERC),

had held that the Regulations would supersede such Judgments. CR responded that he

was making the point that the ATEJudgment should be reflected while framing the

Regulations.

10.2 Case No. 71 of 2016

a) While broadly agreeing with the contentions in Case No. 69 of 2016, CPPA stated

that, unlike the other Petitioners, he was seeking review of the RPO Regulations, 2016

under Regulation 85 of the Conduct of Business Regulations, 2004 and Section 94 of

the EA, 2003 so as to restore the proviso to Regulation 11.3 which was contained in

the draft Regulations. That proviso retained the exemption to captive users of power

from grid-connected fossil fuel-based Co-generation Plants from RPO. However, the

final RPO Regulations, 2016 were notified on 30 March, 2016 without this exemption

considering Clause 6.4 of the Tariff Policy dated 28 January, 2016.


b) CPPA stated that the ATE Judgment dated 26 April, 2010 in Appeal No 57 of 2009

is binding under S. 121 of the EA, 2003. Under S. 121, subordinate legislation (such

as Regulations) or policies (such as the Tariff Policy, 2016) cannot override such

Judgments. In the well-known Shah Bano case, the law was amended. CPPA also

submitted a chronology and compilation in this connection. The ATE ruling can be

appealed against in the Supreme Court, but there is no Supreme Court finding against

the ATE Judgment in Case No. 57 of 2009. The Tariff Policy, 2016 does not state that

it has considered the ATE Judgment, nor has the law been amended. In Appeal No.

103 of 2015 (Maruti Suzuki), the ATE also held that the provisions of the Tariff

Policy are not mandatory or binding on the State Commissions. The Commission

observed that this position had been settled long back.

c)In light of the above, CPPA submitted that review of the exclusion of the exemption

contained in the draft Regulations was an error apparent justifying review. The

notified Regulations excluding the exemption was a major deviation from the draft

published earlier, and an opportunity to respond ought to have been given before

doing so. Even then, the ATE Judgment would prevail.

d) To the Commission’s query as to what stand might have been taken had the new

Tariff Policy provision been in force at the time of the ATE Judgment, CPPA stated

that it was open to the Commission to approach the ATE for directions in the light of

the new Tariff Policy. CPPA stated that it would circulate other Judgments also and

place on record the legal points.

e) Dr. Ashok Pendse of TBIA pointed out that, while Case No. 69 of 2016 concerns

Co-Generation CGPs, Case No. 71 of 2016 refers to all CGPs. That distinction may

be kept in mind.

10.3 Case No. 73 of 2016

a) UGSL also broadly agreed with the contentions made in the earlier two Cases.

UGSL stated that the issue raised in the ATE Appeal No. 57 of 2009 was whether, as

a Co-Generation CGP, Century Rayon is required to purchase power from a RE Co-

generator. The ATE held that co-Generation in this context of the EA, 2003 was not

limited to RE co-generation alone, and hence that fastening of RPO on a Co-generator

(based on RE or otherwise) would defeat the purpose of Section 86(1)(e). The ATE

Full Bench on the Appeal against the Commission’s Order in the Lloyds Metal Case

had ruled against a Distribution Licensee having to purchase power from fossil fuel-

based Co-Generation.

b) UGSL also referred to the ATE Judgment dated 1 October, 2010 (India Glycols

Ltd. v/s UERC) in Appeal Nos. 112, 130 and 136 of 2014, in which the ATE had

relied entirely on its Judgment in Case No. 57 of 2009 and had reiterated it with

regard to the UERC Regulations. That seems to be the latest Judgment on this subject.


Commissions Analysis and Rulings:

11. The Petitioners seek amendment of the RPO Regulations, 2016 to restore the

provision in the previous RPO Regulations, 2010 exempting captive users of

grid-connected fossil fuel-based Co-generation CGPs from RPO.

12. The Petitioners have referred to the following among other ATE Judgments in

these proceedings:

12.1 ATE Judgment dated 26 April, 2010 in Appeal No. 57 of 2009 (Century

Rayon vs. MERC):

“45. Summary of our conclusions is given below:-

(I) The plain reading of Section 86(1)(e) does not show that the expression

‘co-generation’ means cogeneration from renewable sources alone. The

meaning of the term ‘co- generation’ has to be understood as defined in

definition Section 2 (12) of the Act.

(II) As per Section 86(1)(e), there are two categories of generators namely

(1) Co-generators (2) Generators of electricity through renewable sources of

energy. It is clear from this Section that both these categories must be

promoted by the State Commission by directing the distribution licensees to

purchase electricity from both of these categories.

(III) The fastening of the obligation on the co-generator to procure

electricity from renewable energy procures would defeat the object of

Section 86 (1)(e).

(IV) The clear meaning of the words contained in Section 86(1)(e) is that

both are different and both are required to be promoted and as such the

fastening of liability on one in preference to the other is totally contrary to

the legislative interest.

(V) Under the scheme of the Act, both renewable source of energy and

cogeneration power plant, are equally entitled to be promoted by State

Commission through the suitable methods and suitable directions, in view of

the fact that cogeneration plants, who provide many number of benefits to

environment as well as to the public at large, are to be entitled to be treated

at par with the other renewable energy sources.

(VI) The intention of the legislature is to clearly promote cogeneration in

this industry generally irrespective of the nature of the fuel used for such

cogeneration and not cogeneration or generation from renewable energy

sources alone.”

12.2 ATE Judgment dated 2 December, 2013 in Appeal No. 53 of 2012 (Lloyds

Metal & Energy Ltd. v MERC):

“39. Summary of our findings:


Upon conjoint reading of the provisions of the Electricity Act, the National

Electricity Policy, Tariff Policy and the intent of the legislature while

passing the Electricity Act as reflected in the Report of the Standing

Committee on Energy presented to Lok Sabha on 19.12.2002, we have come

to the conclusion that a distribution company cannot be fastened with the

obligation to purchase a percentage of its consumption from fossil fuel

based co-generation under Section 86(1)(e) of the Electricity Act, 2003.

Such purchase obligation 86(1)(e) can be fastened only from electricity

generated from renewable sources of energy. However, the State

Commission can promote fossil fuel based co-generation by other measures

such as facilitating sale of surplus electricity available at such co-generation

plants in the interest of promoting energy efficiency and grid security, etc.”

12.3 ATE Judgment dated 1 October, 2014 in Appeal Nos. 112, 130 and 136 of

2014 (India Glycols Ltd. etc. vs. UERC):

“23. SUMMARY OF OUR FINDINGS

The Co-generation based Captive Power Plant/Captive user cannot be

fastened with renewable purchase obligation as provided under UERC

(Compliance of RPO) Regulations, 2010, as subsequently, amended by

UERC (Compliance of RPO) (First Amendment) Regulations, 2013. The

judgment, dated 26.4.2010 of this Appellate Tribunal in Appeal No. 57 of

2009 in the case of Century Rayon vs. MERC, whereby the provisions of

Section 86(1)(e) of the Electricity Act, 2003 were interpreted and in

compliance of which the learned State Commission has amended the

definition ‘Obligated entity’ as was then existing in UERC (Compliance of

RPO) Regulations, 2010 by UERC (Compliance of RPO) (First Amendment)

Regulations, 2013, shall be held to be applicable from the date of the

judgment itself. Though, in compliance of the said judgment, dated

26.4.2010, the Regulations were amended in the year 2013 by the State

Commission. It was a fit case where the State Commission should have

exercised its power to relax according to its own Regulations in order to give

effect to the judgment, dated 26.4.2010, passed by this Appellate Tribunal in

Appeal No. 57 of 2009, in the case of Century Rayon vs. MERC in letter and

spirit, in order to give relief to the Co-generation based Captive Power

Plants/Captive users entitled to it….”

13. The earlier RPO Regulations, 2010 were notified on 7 June, 2010, subsequent to

the ATE Judgment dated 26 April, 2010 in Appeal No. 57 of 2009 (Century

Rayon). The proviso to Regulation 11.3 exempted captive users of grid-connected

fossil fuel-based Co-generation Plants from RPO:

“11.3 If the Captive User(s) and Open Access consumer(s) are unable to

fulfil their obligation, they shall be liable to pay RPO Regulatory Charges as

specified in Regulation 12.1.

Provided further that captive user(s) consuming power from grid connected

fossil fuel based co-generation plants, are exempted from applicability of

RPO target and other related conditions as specified in these Regulations.”


14. On 24 December, 2015, the Commission issued a Public Notice inviting

comments on the draft of the new RPO Regulations proposed for FY 2016-17 to

FY 2019-20. The draft Regulations retained the RPO exemption provided in the

2010 Regulations to captive users of grid-connected fossil fuel-based Co-

generation CGPs.

15. Comments on the draft Regulations were invited by 19 January, and then upto

15 February, 2016. In the meantime, the MoP, Govt. of India, vide Resolution

dated 28 January, 2016, notified the revised Tariff Policy, 2016 in pursuance of

Section 3(3) of the EA, 2003. With regard to RPO, the Proviso to Clause 6.4 (1)

reads as follows:

“Provided that cogeneration from sources other than renewable sources

shall not be excluded from the applicability of RPOs.”

16. Section 86(4) of the EA, 2003 requires that, in the discharge of its functions, the

Commission shall be ‘guided’, inter alia, by the Tariff Policy. Under Section 61

(h) also, the Commission is to be ‘guided’ by the Tariff Policy, among others,

while specifying the terms and conditions for the determination of tariff. Thus,

while finalizing the draft Regulations following the public consultation process,

the Commission took into consideration the above provision of the revised Tariff

Policy, 2016 which was notified after the draft Regulations and was already in

the public domain for some time during the period of public consultation. The

final RPO Regulations, 2016, notified on 30 March, 2016 do not exempt captive

users of fossil-fuel based CGPs from RPO. The Statement of Reasons published

by the Commission expressly refers to the above provision of the revised Tariff

Policy, 2016 in this regard.

17. The RPO Regulations, 2016 as finally notified also included some other changes

to the draft, such as a steeper Solar RPO trajectory. The Commission also notes

that the new Regulations increase the minimum limit for application of RPO

from 1 MW to 5 MW for fossil fuel-based Captive Generators, among others.

Composite RPO targets (without segregation between Solar and non-Solar) have

also been introduced in case of captive users of such CGPs upto to 10 MW

capacity.

18. The Petitioners have argued that the ATE Judgment in Appeal 57 of 2009

(Century Rayon) (quoted at para. 12.1 above) is applicable, in particular with

regard to their claim for exemption from RPO to captive users of non-fossil fuel-

based Co-generation. According to the Petitioners, the Full Bench Judgment of

ATE in Appeal no. 53 of 2012 (Lloyds Metal) (quoted at para. 12(2) above), while

holding that the State Commission may promote fossil fuel based co-generation

by other means such as facilitating the sale of surplus energy, did not disturb its

earlier ruling in the Century Rayon case that RPO not be applied to Co-

generation Plants. Hence, the Petitioners contend that the imposition of RPO on


captive users of fossil fuel-based CGPs in the RPO Regulations, 2016 is in

conflict with the ATE Judgement in the Century Rayon case (Appeal No. 57 of

2009). A challenge to that Judgment is pending before the Supreme Court, but it

has not been stayed.

19. While the Rajasthan High Court, on 31 August, 2012, had dismissed challenges

to the imposition of RPO by RERC on captive users, the Petitioners have stated

that the matter pertained to CGPs in general. The High Court did not look into

the issue of application of RPO to fossil fuel-based Co-generation Plants because

RERC had itself excluded them from RPO. Hence, there is no conflict between

the Rajasthan High Court and the ATE Judgments cited earlier.

20. However, the Commission notes that the Petitioners have not referred in these

proceedings to the more recent Gujarat High Court Judgment dated 12 March,

2015 in Special Civil Application No. 171 of 2011 with Civil Application no.

11627 of 2011 (Hindalco and others). That Judgment dealt with various issues,

including the applicability of the various ATE Judgments which have been cited.

The Gujarat High Court has held as follows:

“22. That contention of Mr. S.N. Soparkar that co−generation plant of

petitioners of Special Civil Application No.791 of 2011 that it is based on

fossil fuel and is non−conventional in view of decision in the case of Lloyds

Metal & Energy Ltd. [supra] of APTEL, though appears to be attractive on

first blush but non−conventional energy cannot be equated always with

renewable source of energy. That co−generation is a process simultaneously

producing two or more forms of useful energy though never defines type of

input or source of fuel to be used, but co−generation provided under Section

86(1)(e) of the Act, 2003 is not co−generation stand alone, but it is

co−generation and generation of electricity from renewable sources of

energy. Thus, a source or input of energy may be non−conventional in the

sense that CGP or co−generation following innovative or advanced

technology, which may be eco−friendly and reducing carbon credit, but only

on that ground is not the same renewable source of energy like hydro, wind,

solar, biomass, bagasse, etc.That non−conventional energy always and for

all purposes cannot be equated with non−renewable sources of energy.

22.1 That the judgment dated 26.04.2010 of the APEL in Appeal No. 57 of

2009 in the matter of Century Rayon Ltd. vs. Maharashtra Electricity

Regulatory Commissioner & Ors. fell into consideration in Appeal No. 53 of

2012 and by order dated 29.12.2011 interim relief to enable sale of electricity

from co- generation plant based on industrial waste heat generated by the

sponge iron plant with the use of fossil fuel [coal] and directions to be issued

to the distribution licensee came to be rejected, but the issue that whether the

distribution licensee would be fastened with the obligation to purchase a

percentage of its source from co−generation irrespective of fuel use being

important issue came to be re−examined by the Full Bench and accordingly,

upon an exercise undertaken about finality of the judgment dated

26.04.2010 in Appeal No.57 of 2009, it appears that the Full Bench of

Appellate Tribunal for Electricity [Appellate Jurisdiction] in the case of


Lloyds Metal & Energy Ltd. vs. Maharashtra State Electricity Distribution

Company Limited in Appeal No.53 of 2012 considered the order dated

29.12.2011 rendered by the Division Bench of APTEL in Appeal No.57 of

2009 in the matter of Century Rayon Ltd. vs. Maharashtra Electricity

Regulatory Commission and others and framed the following question:

"Whether the Distribution Licensees could be fastened with the

obligation to purchase a percentage of its consumption from

co−generation irrespective of the fuel used under Section 86(1)(e) of

the Act 2003".

The Full Bench of APTEL vide order dated 02.12.2013 passed in Appeal

No.53 of 2012, held in para 39, as under:

"39. Summary of our findings:

Upon conjoint reading of the provisions of the Electricity Act, the

National Electricity Policy,Tariff Policy and the intent of the

legislature while passing the Electricity Act as reflected in the Report

of the sanding Committee on Energy presented to Lok Sabha on

19.12.2002, we have come to the conclusion that a distribution

company cannot be fastened with the obligation to pursue a

percentage of its consumption from fossil fuel based co−generation

under Section 86(1)(e) of the Electricity Act, 2003. Such purchase

obligation 86(1)(e) can be fastened only from electricity generated

from renewal sources of energy. However, the State Commission can

promote fossil fuel based co−generation by other measures such as

facilitating sale of surplus electricity available at such co−generation

plants in the interest of promoting energy efficiency and grid

security, etc."

Thus, judgment dated 26.04.2010 in Century Rayon [supra] [Appeal No.57

of 209]; judgment dated 17.04.2013 in IA 262 of 2012 in RP (DFR) No.1311

of 2012 in Appeal NO.57 of 2009 filed by Gujarat Electricity Regulatory

Commission; judgment dated 30.01.2013 in Appeal No.54 of 2012 filed by

M/s. Emami Paper Mills; judgment dated 31.01.2013 in Appeal no.59 of

2012 filed by M/s. Vedanta Aluminium Ltd. [VA]; and judgment dated

10.04.2013 in Appeal NO.125 of 2012 filed by M/s. Hindalco Industries

Limited, all delivered by the APTEL have no significance and force of law in

view of judgment dated 02.12.2013 rendered by the Full Bench of the

APTEL in Appeal No. 53 of 2012…

.

24. The GERC did keep in mind all the representations submitted by the

objectors before determining renewable purchase obligation [RPO] and,

while doing so, the GERC also provided production capacity of electricity of

CPPs and only those CPPs, who produce more than 5 MV of electricity, are

brought within the purview of the RPO and, therefore, it would not hit or

create imbalance in the functioning of the CPPs. The Commission also

applied all the criteria including technical parameters and functioning

capacity of CPP vis−à−vis interest of power generating plant in renewable

source of energy and their survival in consonance with National Electricity

Plan and Tariff Policy. That, Section 86(1)(e) of the Act is not only for


promoting co−generation stand alone system, but, it is for promotion of

co−generation and generation from renewable source of energy. In this

context, if the definition contained in Section 2(12) of the Act is seen, it is

clear that 'co−generation' means a process which simultaneously produces

two or more forms of useful energy (including electricity). In the above

process, excess energy is harnessed by a particular process and electricity is

generated.”

21. Thus, the Commission is of the view that the mandate under Section 86(1)(e) of

the Electricity Act, 2003 for the specification of RPO targets does not exempt the

consumption by captive users of CGPs based on fossil fuel-based co-generation

notwithstanding the fact that such co-generation may be more efficient than

other conventional generation or have other merits.

22. In view of the foregoing discussion, the Commission concludes that the claim of

the Petitioners for amendment of the RPO Regulations, 2016 so as to restore the

earlier exemption from RPO to captive users of non-fossil fuel-based Co-

generation Plants has no merit.

23. However, having due regard to the pendency of these Petitions, the

circumstances of the matter and the issues involved, the Commission may

consider any consequent shortfall of such captive users of non-fossil fuel-based

CGPs in meeting their RPO targets in FY 2016-17 and FY 2017-18 to be met in

FY 2018-19 in its compliance verification proceedings for those years.

The Petitions of M/s Century Rayon, Captive Power Producers Association and M/s Uttam

Galva Steels Ltd. in Case Nos. 69, 71 and 73 of 2016, respectively, stand disposed of

accordingly.

Sd/- Sd/-

(Deepak Lad) (Azeez M. Khan)

Member Member

before the maharashtra electricity … 58 42/order-69 71 73 of 2016... · petition of century rayon...

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