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The Electricity Act 2003 (EA 2003) allowed freedom for the captive power generators and captive consumers. Till couple of years after the EA 2003, the captive power sector was closed for any external investment and the growth was not enthusiastic. A few of the states had allowed sharing of a power plant among the consumers subject to rigid rules on consumption, investment and ownership. Excess capacity could not be economically exploited and the electricity boards had a tight grip over the excess power available in the captive system and paid a nominal tariff – in several states almost only variable cost. Ministry of Power ( MoP) empowered by the EA 2003- brought out a Notification on 8th June 2005 (GCPN).
Salient features of the GCPN are :
- Captive generating plant was defined as one in which captive consumers (a) hold a minimum of 26% of the ownership (b) consume not less than 51% of the aggregate generation computed on an annual basis
- If the generating plant was set up by a registered cooperative society the consumers collectively have to consume not less than 51% of the aggregate generation implying that in case of any other form of entity, this obligation is to be in proportion to the ownership rights.
Section 9 of the Electricity act 2003 :
- Group captive power plant, unlike an individual captive power plant, is a unique structure where a developer sets up a power plant for collective use of many industrial consumers who should have 26 per cent equity in the plant and must consume 51 per cent of the power produced.
- Sec 38,39 and 40 of the Act made it mandatory for the Central Transmission Utility (CTU) and the State Transmission Utility (STU) to provide non discriminatory Open Access to the captive generator for the use of transmission system for his/their own use without any surcharge.
- This Group Captive policy is a boon for the industrial consumers. Industrial consumer segment is growing at a fast pace, which doesn't want to depend on state utilities for its power needs because they are expensive and unreliable.
- The extensively high tariff of SEB's are a huge burden to the industrial consumers. The objective would be to sell to these Industrial consumers. The price will be at a discount to the EB High Tension tariff (say 5-7% - net of wheeling) or at a fixed rate not less than the rate for wind farms in the state payable by the Discoms(for power from wind farms).
- These are specially beneficial for small and medium scale industries that don't have the wherewithal to set up or manage their own power plants but need power to run their businesses. Also, through such an arrangement the industries are exempt from paying the cross-subsidy surcharge.
- The concept is very much essential in the states where EB industrial tariffs are very high. The government, through group captive power plants policy, gave an alternative route to the industries.