In a significant ruling for open access consumers and captive power users, the Haryana Electricity Regulatory Commission (HERC) has clarified that exemption from Cross Subsidy Surcharge (CSS) available to captive consumers under Section 42(2) of the Electricity Act, 2003 is not dependent upon the nature of open access availed. The Commission held that the exemption applies equally to captive power transactions undertaken through Short-Term Open Access (STOA), provided the captive status stands duly established.
The order was passed in Petition No. 9 of 2026 filed by Jindal Stainless Limited against Dakshin Haryana Bijli Vitran Nigam Limited (DHBVNL).
Background of the Dispute
Jindal Stainless approached HERC seeking clarification after DHBVNL rejected its request for exemption and refund of Cross Subsidy Surcharge on captive power procured from its captive generating arrangement through Short-Term Open Access. The company argued that once captive status is verified under applicable law, the statutory exemption from CSS cannot be denied merely because power is being scheduled through STOA instead of Long-Term Open Access (LTOA) or Medium-Term Open Access (MTOA).
The petitioner further sought refund of CSS already recovered by DHBVNL from captive power transactions commencing from March 2025 onwards.
DHBVNL's Stand
DHBVNL opposed the petition and relied heavily upon Regulation 3(2a) of the HERC Open Access Regulations, 2013. According to the utility, the regulation specifically excludes STOA consumers from the definition of "beneficiaries." DHBVNL contended that because STOA consumers are excluded from the category of beneficiaries, they cannot claim exemption from Cross Subsidy Surcharge.
Key Issue Before HERC
The central question before the Commission was whether the exemption from Cross Subsidy Surcharge available to captive consumers under Section 42(2) of the Electricity Act and Regulation 21(1) of the HERC Open Access Regulations is dependent upon the type of open access availed, namely:
- Long-Term Open Access (LTOA)
- Medium-Term Open Access (MTOA)
- Short-Term Open Access (STOA)
Commission's Findings
HERC noted at the outset that the captive status of the generating plant had already been certified by the Central Electricity Authority (CEA) and was not under dispute. Therefore, the only issue requiring adjudication was whether STOA could deprive a captive consumer of the statutory exemption from CSS.
After examining the regulatory framework, the Commission concluded that the definition of "beneficiary" introduced in the 2013 amendment regulations was intended solely for the purpose of determination and recovery of transmission charges. The exclusion of STOA consumers from that definition was therefore limited to the transmission charge mechanism and could not be extended to deny a statutory exemption granted under the Electricity Act.
HERC observed that STOA consumers are charged transmission charges through a different methodology, namely on an energy basis (Rs./kWh), whereas other beneficiaries bear charges based on transformation capacity or contracted capacity. The distinction was therefore purely for transmission charge recovery and not for determining entitlement to CSS exemption.
Importance of the Ruling
The Commission effectively held that a genuine captive consumer cannot lose the benefit of exemption from Cross Subsidy Surcharge merely because it chooses to avail Short-Term Open Access.
The ruling strengthens the statutory protection available to captive users under Section 42(2) of the Electricity Act and prevents distribution licensees from restricting such exemption through interpretational reliance on transmission charge regulations.
Impact on Industry
The decision is likely to have substantial implications for:
- Captive power consumers in Haryana.
- Manufacturing industries using renewable captive power.
- Open access consumers procuring power through STOA.
- Renewable energy developers operating captive structures.
- Distribution licensees dealing with CSS-related disputes.
The ruling provides regulatory certainty to industries that increasingly rely on short-term scheduling arrangements while maintaining captive status.
Conclusion
With this order, HERC has reaffirmed that the statutory exemption from Cross Subsidy Surcharge flows from the captive nature of the transaction and not from the tenure of open access availed. The decision is expected to be welcomed by industrial consumers and captive power users across Haryana and may become an important precedent in future disputes involving CSS and captive consumption.
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