CEA Introduces New Verification Procedure For Captive Power Plants Across Multiple States

Introduction

The Central Electricity Authority (CEA), under the Ministry of Power, Government of India, has introduced a comprehensive verification procedure for captive power plants (CPPs) operating across multiple states. This initiative, effective from the financial year 2024–25, aims to streamline compliance with the Electricity Rules, 2005, and ensure transparency in determining the captive status of generating plants and their users. The move addresses the growing complexity of interstate captive power arrangements, particularly for renewable energy projects and hybrid systems, while aligning with recent judicial interpretations and regulatory amendments.

Explanation (Key Points)

1. Legal Framework

• Basis: The procedure is mandated under Rule 3(3) of the Electricity Rules, 2005, as amended in 2023. It defines criteria for verifying whether a plant qualifies as a Captive Generating Plant (CGP).
• Objective: To ensure CPPs meet ownership and consumption thresholds:
  • Ownership: At least 26% equity must be held by captive users.
  • Consumption: A minimum of 51% of annual generation must be consumed by captive users.

2. Applicability

• Interstate Operations: Applies to plants and users located in more than one state.
• Entities Covered: Includes conventional, renewable, and hybrid power plants, as well as those using Energy Storage Systems (ESS).

3. Verification Authority

• Role of CEA: The Director, Legal Division, CEA, acts as the Verifying Authority. Responsibilities include:
  • Validating ownership and consumption data.
  • Issuing captive status certificates within two months of application.
  • Informing stakeholders like DISCOMs, SLDCs, and regulatory bodies.

4. Ownership and Consumption Compliance

• Weighted Average Calculation: For ownership changes during the year, a weighted average shareholding is used to ensure compliance (e.g., shares held for varying periods are proportionally adjusted).
• Proportional Consumption Test: For group captive users (excluding cooperatives), consumption must align with ownership shares within a ±10% variation. A Unitary Qualifying Ratio (UQR) ensures proportionality.
• Subsidiary/Holding Companies: Consumption by subsidiaries or holding companies of captive users is admissible toward the 51% threshold.

5. Special Provisions

• Renewable Hybrid Plants: Must comply with ownership and consumption rules for each unit identified as captive.
• Energy Storage Systems (ESS):
  • ESS losses are excluded if used as generators.
  • ESS ownership impacts compliance only if integrated into the CGP.
• Special Purpose Vehicles (SPVs): Recognized as “associations of persons” (per Supreme Court, 2023). SPVs cannot consume power but must ensure compliance by their captive users.

6. Procedural Requirements

• Application Process:
  • Submit by May 31 annually, including affidavits, ownership certificates, and consumption data.
  • Mandatory registration on CEA’s e-Gen portal.
• Metering: Real-time interface meters linked to SLDCs/RLDCs are required for generation and consumption tracking.
• Authentication: Data must be validated by SLDCs, RLDCs, or DISCOMs.

7. Appellate Mechanism

• Two-Tier Appeals:
  • First Appeal: To CEA’s Chief Engineer (Legal Division) within 30 days.
  • Second Appeal: To a committee of CEA members if unresolved.

8. Penalties for Non-Compliance

• Failure to meet criteria disqualifies the plant’s captive status for the year, treating its entire generation as commercial supply.

Conclusion

The CEA’s new verification procedure marks a significant step toward standardizing interstate captive power operations in India. By enforcing strict ownership and consumption norms, it aims to curb misuse of captive benefits while promoting renewable energy adoption. The inclusion of weighted averages, proportional consumption tests, and ESS provisions reflects adaptability to modern energy systems. For industries, compliance will ensure cost savings and regulatory clarity, though meticulous record-keeping and coordination with authorities will be critical. Ultimately, this framework strengthens India’s energy governance, balancing industrial needs with grid stability and sustainability goals.

https://cea.nic.in/wp-content/uploads/notification/2025/02/Issuance_of_Captive_Procedure.pdf