Maharashtra MERC Rules Captive Renewable Power Gets No Priority in Open Access

The Maharashtra Electricity Regulatory Commission (MERC) has dismissed a petition filed by Sanyo Special Steel Manufacturing India Pvt. Ltd. (SSSMIPL), ruling that electricity generated from a captive renewable energy source does not receive priority over power procured from third party renewable energy generators while adjusting energy credits against consumption under Maharashtra’s open access framework.

The order, issued  by a bench comprising Chairperson Valsa Nair Singh and Members Anand M. Limaye and Surendra J. Biyani, clarified the priority adjustment methodology under Regulation 14.10 of the MERC Distribution Open Access First Amendment Regulations, 2019.

SSSMIPL, a partial open access consumer with a contract demand of 46 MW, sources electricity from a 28.125 MW solar captive generating plant owned by TP Alpha Limited, besides procuring power from multiple non captive renewable energy generators on short term and medium term arrangements.

The company challenged the billing methodology followed by Maharashtra State Electricity Distribution Company Limited (MSEDCL) for the period between September 2024 and January 2025. SSSMIPL argued that MSEDCL was incorrectly adjusting electricity sourced from non captive renewable generators before captive solar power, resulting in captive generation being pushed into the banking mechanism.

The steel manufacturer contended that captive renewable energy should receive priority within the renewable energy category under Regulation 14.10. According to SSSMIPL, the existing adjustment methodology could affect its compliance with Rule 3 of the Electricity Rules, 2005, under which a captive user is required to consume at least 51 percent of the electricity generated by its captive plant to retain captive status and associated exemptions from cross subsidy surcharge and additional surcharge.

SSSMIPL also claimed that the adjustment methodology had resulted in an 8 percent banking loss, automatic lapse of unused energy and monthly financial losses of around INR 6.40 lakh.

MSEDCL opposed the petition and maintained that its billing process complied with Regulation 14.10. The distribution company argued that the regulation establishes a specific priority sequence, with “Renewable Energy Generators” listed under clause (a) and “Captive Generating Plant” under clause (b) as separate categories.

MSEDCL submitted that pro rata adjustment applies only among generators belonging to the same category and that the regulation does not provide captive renewable energy with priority over electricity procured from third party renewable energy generators. It also maintained that compliance with the 51 percent captive consumption requirement rests with the consumer.

The Commission rejected SSSMIPL’s interpretation and held that Regulation 14.10 establishes a category based framework with a specific sequential order. According to the order, the language of the regulation makes a deliberate distinction between renewable energy generators and captive generating plants. The Commission observed that treating captive renewable generation as part of the renewable energy generator category would make the separate provision for captive generating plants unnecessary.

The Commission also considered the Statement of Reasons accompanying the 2019 amendments. It noted that proposals seeking higher priority for captive renewable energy had been considered during the regulatory process but were not accepted. The Commission further held that the provision relating to pro rata adjustment could not be used to combine or rearrange separate categories specified under the regulation.

SSSMIPL had also relied on purposive and beneficial interpretation of the regulations. The Commission rejected this argument, stating that such principles are applicable where statutory provisions are ambiguous. In this case, it found Regulation 14.10 to be clear in both its language and intent.

The Commission also rejected the company’s contention that MSEDCL’s billing methodology created a risk of losing captive status. It held that Rule 3 of the Electricity Rules, 2005 places the responsibility for maintaining captive status on the consumer and does not require the distribution licensee to structure billing or energy credit adjustments to ensure compliance with the captive consumption requirement.

On the issue of banked energy and Time of Day slot restrictions, the Commission referred to Regulation 20.3 of the DOA First Amendment Regulations, 2019, which requires monthly banking and slot specific accounting. The Commission held that SSSMIPL’s inability to fully utilise its banked energy resulted from its own sourcing and scheduling strategy rather than any action, omission or regulatory breach by MSEDCL.

The Commission therefore concluded that MSEDCL’s energy credit adjustment methodology was consistent with the applicable regulations. It dismissed SSSMIPL’s petition in its entirety and rejected the company’s requests for financial compensation, revision of bills for the September 2024 to January 2025 period and reimbursement of legal costs.

The ruling reinforces the regulatory distinction between renewable energy procured from third party generators and electricity generated through captive renewable energy plants under Maharashtra’s open access framework. For industrial and commercial consumers that combine captive solar generation with third party renewable power, the decision provides clarity on the applicable energy credit adjustment and settlement mechanism.

The order also underscores that consumers remain responsible for managing their procurement and scheduling arrangements to meet captive consumption requirements and avoid losses associated with unused banked energy. The ruling is expected to remain relevant for commercial and industrial consumers evaluating combinations of captive renewable generation and third party renewable power under Maharashtra’s open access regime.