Parallel Operation Charge (POC), levied in some states on captive power plants i.e. captive consumers (CPPs), has been a source of contention within the regulatory landscape in the power sector since its inception over two decades ago. This charge is levied to compensate electricity distribution companies (Discoms) for costs incurred for the grid support services provided by them. In recent years, many more Discoms across states have been petitioning for the levy of POC on CPPs. However, the basis for POC, both technical and economic, has consistently been challenged by CPPs.   This article examines the evolving rationale and implementation of POC across eight states - Andhra Pradesh, Telangana, Gujarat, Rajasthan, Odisha, Tamil Nadu, Madhya Pradesh and Chhattisgarh. Drawing from orders by State Electricity Regulatory Commissions (SERCs), the Appellate Tribunal for Electricity (APTEL) and the Supreme Court, the article highlights the wide divergence in regulatory approaches across states and analyses whether POC in its current form is an appropriate mechanism of Discom compensation, amid a changing grid and an ongoing energy transition. It explores ways in which POC can be re-designed and suggests existing alternative charges and frameworks that can be made more robust, easy to implement, and cost-reflective.

1. Introduction

Parallel Operation Charges (POC) have existed in the power sector since the early 2000s. However, the interpretation and implementation of the charge have evolved over time and continue to vary significantly across states. The charge has also witnessed significant litigation across the past two decades between the captive consumers¹ and the Discoms. This has led to a disparate and fragmented evolution of the framework. On 29.11.2019, the Supreme Court, in Civil Appeal No. 4569 of 2003, upheld the levy of POC acknowledging it as a service provided by the Discom to the CPPs. Post this, since 2020, there has been a renewed interest on the subject with at least 3 states - Rajasthan (once in 2020, then again in 2024²), Telangana and Odisha petitioning the Electricity Regulatory Commissions (ERCs) to approve the levy of the charge.

Broadly, POC is levied by Discoms on captive power plants (CPPs) i.e. captive consumers. CPPs operate their plant in synchronization/parallel with the grid, which enables them to draw power from the grid during fluctuations, faults or other emergencies. This ensures safety, security and reliability for the operation of CPPs, with the support of a larger and stable system afforded by the grid. This, Discoms argue, is not without imposing a burden on the grid in the form of 'grid pollution' through the injection of harmonics, disruption of grid frequency, and dips in grid voltage. Furthermore, parallel operation assists CPPs in cost savings by Discoms supplying instantaneous peak power demand required during the initiation of heavy equipment such as motors and furnaces. This instantaneous peak demand significantly exceeds the installed capacity of CPPs, and without parallel operation, it would necessitate the installation of a much higher capacity. However, CPPs contend that the actual costs and benefit of parallel operation to the grid have to be carefully examined through a detailed study while deciding the charge.

The levy of POC lies at the intersection of three critical sectoral concerns:

• First, Discoms across the country are financially stressed and must ensure adequate pricing of their services so that they are fairly compensated.
• Second, the nature of the grid is rapidly evolving with the growing integration of renewable energy (RE) sources.
• Third, as per the CEA (Technical Standards for Connectivity of the Distributed Generation Resources) Amendment Regulations, 2019, CPPs today are mandated to limit grid disturbances such as injection of harmonics, voltage fluctuations etc. by installing appropriate protective equipment to reduce any adverse impact. Discoms too are mandated to install meters to measure and monitor power quality.

These interlinked issues bring into question the relevance of POC that merits further deliberation.

Towards this, the article undertakes a cross-state analysis of the levy of POC in eight states³ - Andhra Pradesh, Chhattisgarh, Gujarat, Madhya Pradesh, Odisha, Rajasthan, Tamil Nadu and Telangana. These states account for 67% of captive consumption nationally in terms of self-use figures. Furthermore, they account for 2.8% of the total national RE consumption and 58.7% of the total national non-RE consumption (figures for both computed from the data provided in Table 5.7 of the CEA General Review 2024 compilation). Presently, across 7 states, the POC payable by captive consumers ranges from ₹10/kVA/month to ₹50/kVA/month. Except Odisha ERC, all the above SERCs have approved the levy of POC in their respective states.

The article seeks to identify and compare these variations across states, drawing out similarities and differences in state regulatory approaches. In Appeal No. 385 of 2023 order dated 30.05.2024, the Appellate Tribunal for Electricity (APTEL) observed that the modern grid is larger, more reliable, and capable of absorbing certain grid disturbances. Therefore, it directed that studies should be undertaken to assess the actual impact of parallel operation on the grid. Despite this directive and the long-standing legal and regulatory developments surrounding POC, there has been limited policy discourse on its foundational basis or implementation framework. This article aims to provide a commentary on the developments surrounding the levy of POC and understand its relevance in the context of the changing nature of the grid. Finally, it explores whether there are alternative ways in which Discom services can be efficiently priced.

2. Cross-state analysis of levy of POC

Upon analysing the frameworks of POC across the 8 aforementioned states, it is clear that there are significant variations in the interpretation of POC which are explored ahead.

2.1. Terminology and Incidence

Among the states studied, the charge assumes two different terminologies. In Chhattisgarh, Gujarat, Tamil Nadu, Madhya Pradesh and Rajasthan - the charge is referred to as ‘Parallel Operation Charge’. While in Andhra Pradesh, Telangana, and Odisha, the same charge is referred to as ‘Grid Support Charge’ (GSC). In some cases, like with Chhattisgarh and Maharashtra, POC is also levied in the name of standby charges. In Chhattisgarh, the intention initially was to levy stand-by charges on the CPPs running in parallel with the Chhattisgarh State Electricity Board’s (CSEB’s) Grid at the rate of 7.5% of demand charges on the installed capacity of the CPP⁴.

There are also issues with the non-standardised use of terminology. For instance, in Maharashtra and Madhya Pradesh, a charge levied exclusively on net metering consumers is also called GSC. In Andhra Pradesh, the charge referred to as GSC applies to net metering and captive consumers. However, in Madhya Pradesh, there are two separate charges, GSC levied on net metering and POC levied on captive. This difference and overlap in terminologies (shown below in Table 1) contribute to confusion, legal ambiguity, and further lack of clarity surrounding the interpretation of POC. To eliminate these issues and ensure uniformity, it would be helpful to have a single name for a single charge with a clear and separate definition for each – POC and GSC respectively.

Table 1: Difference in terminology employed across states

POC	GSC (for parallel operation)	GSC (for net metering)
Chhattisgarh, Gujarat, Tamil Nadu, Madhya Pradesh, Rajasthan	Andhra Pradesh, Telangana, Odisha	Maharashtra, Madhya Pradesh

Source: Prayas (Energy Group) compilation from various SERC orders on POC

2.2. Applicability of POC: Capacity considered, locational exemptions and incidence

The issue of which entities are liable to pay POC has been highly litigious across states over the past two decades. In initial instances, the charge was petitioned to be made applicable on all CPPs. This has evolved over the years, and after an APTEL order dated 08.10.2015 in Appeal No. 167 of 2014, most SERCs, namely the ERCs of Andhra Pradesh, Telangana, Tamil Nadu, Gujarat, Madhya Pradesh and Rajasthan have decided to levy POC solely on co-located CPPs. In the said APTEL order, non-co-located CPPs, small hydro plants and wind power plants are exempted from the levy of POC. Chhattisgarh continues to remain an exception seeking to levy POC on all captive as well as non-captive load⁵.

Over time, there has also been a shift in the point of incidence of POC, from being based on installed capacity to being linked to power consumed by the co-located load at the point of common coupling⁶.

In addition, the capacity or consumption considered for levy of POC varies from state to state as detailed in Table 2.

Table 2: Calculation of POC

State	Point of incidence for POC
Tamil Nadu	Net capacity = Installed capacity - Contracted capacity – Open access
Madhya Pradesh	Net capacity = Installed capacity - Auxiliary consumption
Chhattisgarh*	Actual power consumed by captive and non-captive load
Gujarat	Installed capacity

Source: Prayas (Energy Group) compilation from various SERC orders on POC

*Barring the Chhattisgarh order in Petition No. 09 of 2018(M), all the orders are referenced in the Annexure appended below

The Gujarat ERC has a unique practice where, as per an oral order by the High Court of Gujarat, it allows the CPPs to either opt into an agreement with the utility for parallel operation; or opt for payment of demand charges on the basis of 3-minute demand integration metering⁷.

2.3. Methodology

The methodology to compute POC also varies across states, as seen below in Table 3: 

Table 3: State-wise approach towards the methodology adopted for computing POC

Methodology	States
Pre-stipulated fixed charge (in terms of ₹/kVA/month)	Chhattisgarh, Gujarat, Tamil Nadu, Madhya Pradesh, Rajasthan
Charge linked to R&M expenses as a proxy for cost impact	Andhra Pradesh, Telangana

Source: Prayas (Energy Group) compilation from various SERC orders on POC

States have specified a fixed POC in some instances, however, the methodology used to arrive at the magnitude of the charge is unclear. Andhra Pradesh and Telangana ERCs do specify a methodology where POC is computed on the basis of the total generation capacity in the grid and the actual Repair & Maintenance (R&M) costs of the utilities. Here, the two SERCs have used a proxy i.e. R&M costs, for arriving at the cost of providing grid services for co-located CPPs. However, though such parameterising is useful, it is not clear if this is cost-reflective.

Rajasthan ERC in their recent order, and on the basis of the commissioned study by the Electrical Research and Development Association (ERDA), have approved the Base MVA method for Conventional CPPs and the Power Quality method for Renewable CPPs. For Hybrid CPPs, a mix of the two methods has been proposed. In the recent Rajasthan POC order dated 03.10.2025 and the Rajasthan ERC tariff order for FY 2025-26 dated 06.10.2025, the same has been affirmed.

The variation in methodology points to differing principles governing the levy of POC. For instance, in Andhra Pradesh and Telangana, grid maintenance seems to be the reason (given the link to R&M costs), and in Rajasthan, the source of fuel forms the basis – for conventional plants, it is related to load, while for RE plants, it is based on power quality. Overall, the struggle for a clear methodology for the charge highlights a deeper issue - that of the difficulty to establish a clear basis and reasoning for POC.

2.4. Magnitude

The charge across states shows significant variation in magnitude, further reinforcing the absence of a standardised regulatory framework. For a CPP consumer with 1 MW contract demand and 40% load factor, the effective POC ranges from ₹0.041/kWh in Rajasthan (specifically for RE-based CPPs) to ₹0.17/kWh in Andhra Pradesh. In most of the 8 states (7 where the charge has been approved), charges have seen little to no revision over the years. However, the Telangana ERC has increased the quantum of POC incrementally – first, 5% from ₹15.50/kW/month in March 2024 to ₹16.32/kW/month in October 2024; and a further 13% from ₹16.32/kW/month in October 2024 to ₹18.48/kW/month in April 2025 (on a half-yearly basis).

The wide range of the charge on a ₹/kWh basis underlines the variation in how different states perceive and operationalise POC. It would prove helpful to compare the POC levied in a state with the Average Billing Rate (ABR) of that state’s Discom to check how POC fares as a stream of revenue to the Discoms. This is demonstrated in table 4 below.

Table 4: A comparison of POC in ₹/kWh terms⁸ with state ABR for HT Industry (for FY 2023)

State	Parallel Operation Charge	POC (₹/kWh)	ABR for HT Industry (₹/kWh)	POC as a percentage of ABR for HT industry
Andhra Pradesh	50/kW/month	0.17	7.16	2.4%
Gujarat	26.50/kW/month	0.09	7.92	1.2%
Madhya Pradesh	20/kVA/month	0.07	7.47	0.9%
Chhattisgarh	0.13/kWh	0.13	7.17	1.8%
Tamil Nadu	30,000/MW/month	0.10	9.9	1.1%
Rajasthan	Conventional - 27.23/kVA/month RE - 11.90/kVA/month	Conventional - 0.09; RE - 0.041	8.03	1.2%

Source: Prayas (Energy Group)’s Analysis based on data from various SERC orders on POC

Historically, the magnitude of POC has also been a point of contention. Initial proposals in Discom petitions suggested extremely high rates—sometimes up to 50% of applicable demand charges. However, consistent opposition from CPPs has led to a reduction in the overall magnitude of these charges across states.

2.5. Exemptions and Concessions

Several states have introduced specific exemptions and concessions, particularly for RE sources and rooftop solar installations:

1. Chhattisgarh⁹ and Telangana have exempted rooftop solar plants from the levy of POC altogether;
2. Tamil Nadu offers a 50% exemption for municipal solid waste (MSW) plants¹⁰; and
3. Andhra Pradesh has adopted a more nuanced structure, offering concessional POC rates for different categories:

• • ₹50/kW/month for conventional CPPs.
  • ₹25/kW/month for RE plants as well as for co-generation plants (for a period of four months or the actual operation period, whichever is shorter).
  • Rooftop solar installations are charged an even lower POC of ₹15/kW/month¹¹.

Cogeneration plants have received partial concessions in some states. Andhra Pradesh and Telangana ERCs have provided a 50% concession, while Tamil Nadu ERC has granted a similar concession only to municipal solid waste CPPs. As of now, there is no concession for cogeneration in Tamil Nadu, which aligns with the decision of the APTEL in Appeal No. 39 of 2014 dated 29.09.2015. The final judgment on the cogeneration matter in Appeal No. 324 of 2019 is currently pending as on 10.10.2025.

Interestingly, CPPs in Andhra Pradesh had proposed that POC be waived if at least 50% of the captive capacity was under the contract demand with the state transmission utility. However, the Andhra Pradesh ERC did not uphold this proposal.

All of the above points to the variation in extent and structure of concessions across states, and points towards a lack of clarity over how grid support costs are affected by different technologies and sources of energy.

2.6. Challenges in Implementation

One commonly cited operational challenge has been the issue of contract demand restrictions. Discoms in Andhra Pradesh, Gujarat, Telangana, and Chhattisgarh have argued that CPPs often draw beyond their contract demand, placing an additional burden on the grid. CPPs, however, have countered by pointing out that any overdrawal already attracts heavy penalties. Hence, they argue, levying POC for the same reason amounts to double penalisation. However, in the absence of frameworks for energy accounting for embedded generation and cost-reflective charges for standby services, it is unclear if Discoms are adequately compensated.

Regulatory efforts have sought to address these concerns through better metering protocols. For example, the Andhra Pradesh ERC had, as early as 2002, specified demand measurement over 8–10-minute rolling intervals, while Gujarat has provided consumers the option to adopt a 3-minute integration period. However, whether such sophisticated metering systems are actually in place remains unclear as Discoms have frequently cited metering issues and lack of access to necessary data.

Another contested area relates to the treatment of RE and cogeneration-based CPPs. While some states have provided concessions or exemptions, there is a lack of clarity around how RE CPPs affect the grid.

Technical studies conducted by the ERDA in select states have sampled a very limited number of CPPs and an even smaller number of RE CPPs. In the Rajasthan study (2024), 4 RE CPPs out of 9 total CPPs have been considered, while in the Chhattisgarh study (2008), 10 CPP units with likely 0 RE CPPs have been considered (perhaps due to relatively lower RE proliferation at the time). This offers an insufficient basis for broader implementation.

The ERDA has conducted technical studies in Chhattisgarh, Madhya Pradesh, Rajasthan and Odisha (now proposed to be conducted by Bihar too) for estimating the exact quantum of cost and benefits to both the CPPs as well as the grid, especially since parallel operation results in grid pollution. The Chhattisgarh study has also been relied on by Gujarat and Telangana while deciding the levy of POC. The overall sample size for the study has also been limited to only 9-10 plants. With an increasing share of RE in captive generation, there is an urgent need for detailed impact assessments specific to RE plants.

3. The Legal Complexities surrounding POC

The levy of POC has long been a contentious issue in power sector regulation, repeatedly litigated upon, with outcomes that have shaped its legal standing, rationale and implementation across states. Table 5 depicts the litigious timeline of POC - being petitioned for, approved and officially levied across states.

Table 5: Brief timeline of the upholding and levy of POC across states

State	First Petition by Discom	Uphold of levy by SERC	Official year of levy of the charge
Andhra Pradesh	2002	2002	2025
Telangana	2022	2024	2024
Gujarat	2000	2011	2011
Madhya Pradesh	2010	2010 (charge upheld); 2012 (quantum specified)	Past levy is unclear; case pending in SC
Rajasthan	2019	2019 Regulations, 2020 (Tariff Order)	2025
Tamil Nadu	2017	2014 Regulations; 2019	2014
Chhattisgarh	2006	2006	2006
Odisha	2012	Levy rejected in 2014	New petition pending (since 2024)

Source: Prayas (Energy Group) compilation based on past SERC Orders

Rajasthan presents a special case where the APTEL in Appeal No. 103 of 2020 dated 16.07.2020, has issued a stay on the levy of POC in lieu of any scientific study being done for the purpose of determining the rate of POC. Furthermore, the APTEL found procedural issues with the levy of POC as the tariff order dated 06.02.2020 which levied a POC of ₹20/kVA/month did so without public consultation. Post this, in 2024, Rajasthan Discoms have filed a fresh POC petition following a techno-economic study conducted by ERDA. Following public consultation, a Rajasthan ERC order on the same, dated 03.10.2025 has upheld the levy in line with the study, as follows:

• ₹27.237/KVA/month of the installed capacity of conventional CPP;
• ₹11.90/KVA/month of the installed capacity of RE CPP; and
• Both of the above in the ratio of the conventional and renewable share for hybrid CPP.

The levy is now applicable from 06.10.2025 as per the latest tariff order.

Even in the states where the levy has been approved, it has been challenged across multiple fora and the journey has neither been smooth nor linear. To illustrate this, the trajectories for Andhra Pradesh, Gujarat and Chhattisgarh are given in table 6 below:

Table 6: Timeline of the litigious history of POC across three states

Andhra Pradesh	Gujarat	Chhattisgarh
1999: APTRANSCO filed a petition for POC. 2002: Andhra Pradesh ERC upheld levy of POC. High Court struck down the order. 2019: Supreme Court upheld Andhra Pradesh ERC order. 2023: Discoms petitioned for levy of POC in their tariff order. Andhra Pradesh ERC approved the charge to be leviable from FY2025 onwards.	2000: Circular relating to collection of POC quashed and set aside by Gujarat ERC vide order dated 31.08.2000. 2004: Gujarat ERC upholds levy of POC. 2007: APTEL approves levy only till order dated 31.08.2000. 2009: High Court mandates processes to start de novo. 2011: Gujarat ERC freshly upholds levy of POC.	2006: Petition by CPPs against CSEB (Tariff Order, 2005), study by ERDA, Chhattisgarh ERC upheld the levy of POC. 2009: Discom petition – difficulty in implementation. 2015: Discussion paper floated by Chhattisgarh ERC, re-determination of methodology for POC. 2018: CPPs approached APTEL, APTEL directed Chhattisgarh ERC to hold consultations again. 2019: Discom cites metering issues. Chhattisgarh ERC conducts on-site assessment. Approves a charge on kWh basis for ease.

Source: Prayas (Energy Group) compilation from past SERC orders on POC

To understand why this is such a sticky issue, there is merit in understanding the arguments made across all 8 states both for and against the levy of POC.

3.1. Discoms’ arguments

Across cases, Discoms have maintained that CPPs benefit from grid services without contributing to their costs. There are several negative impacts of parallel operation for Discoms (mainly grid pollution) such as-

• reactive power imbalances;
• voltage disturbances and fluctuations (as a result of power outages of CPPs);
• generator faults; and
• absorption of harmonics and negative phase sequence currents

They point to the provision of reactive power support, frequency stabilisation, and reliable startup supply as examples of latent dependencies. Since CPPs typically do not pay sales migration charges such as Additional Surcharge (AS) and Cross Subsidy Surcharge (CSS), Discoms argue that POC is a way to recover these critical costs. Earlier, the contract demand of consumers of CPPs matched their peak demand and helped Discoms recover fixed charges for the peak demand incurred. However, Discoms in Andhra Pradesh, Telangana and Rajasthan have argued that CPPs have significantly reduced their contract demand over time, limiting the revenue recovery from fixed charges. The technical and operational challenges coupled with the loss of revenue from CPPs which is not compensated through ASand CSS together reduce the fixed charge revenue that Discoms receive.

3.2. CPPs’ arguments

CPPs, on the other hand, have questioned both the logic and method of the levy. In Telangana and Gujarat, CPPs have argued that they pay contract demand-based fixed charges under existing tariff structures and that an additional charge for use of grid services in the form of POC constitutes double recovery. Moreover, CPPs argue that since “injection of pollutants” only happens at the point of co-location between the CPP and the grid, only co-located plants should be liable to pay POC/GSC¹².

CPPs argue that grid usage can and should be measured more accurately - and that any levy must reflect actual use, not assumed dependency. This is especially true with more widespread use of Availability Based Tariff (ABT), Special Energy Meters (SEMs), and automated energy accounting.

Cogeneration plants in Andhra Pradesh, Telangana and Tamil Nadu (sugar cogeneration plants) have claimed exemption from POC on the grounds of financial distress, seasonal operation (they operate for only a quarter of the year), and the fact that they are otherwise self-reliant barring their reliance on the grid for their auxiliary consumption and/or for exporting surplus power¹³.

In a few cases like in Andhra Pradesh and Odisha, the locus of Discoms has been brought into question as far as levying POC is concerned. Some CPPs in Andhra Pradesh have claimed that it is the SLDC that maintains grid security and not the Discoms. However, the Supreme Court in its 2019 judgment has held that GSC/POC is leviable only at the instance of the Discom and that SERCs have the power to determine the charge.

More recently, CPPs have also argued that:

1. The modern grid is resilient, making the impact of parallel operation with CPPs negligible;
2. Increased integration of RE in the energy mix also needs to be examined with respect to the amount of grid pollution. Some CPPs in Rajasthan have recently stated that RE CPPs cause more harmonic distortions than conventional CPPs;
3. Installation of protective systems like filters and power quality meters to measure grid disturbances can help prevent or at least significantly curtail grid pollution; and
4. Generators operating under Green Energy Open Access Rules cannot be subjected to the levy of POC as per the applicable charges specified in the rules.

3.3. Evolution of grid and grid filtration systems

As seen from the arguments stated above, the basis of POC is often justified in terms of ‘grid pollution’ caused. As early as 2006, the Chhattisgarh ERC noted that this negative impact, whether through increased fault levels or harmonic distortion, had not been empirically measured. Moreover, the Commission emphasized that modern grids are expected to tolerate such disturbances. In an order dated 31.03.2014 in Case No. 46/2012, the Odisha ERC rejected the levy of POC stating that there were enough provisions in the Odisha Grid Code, 2006 to maintain qualitative supply in the grid. Furthermore, OPTCL should examine the pollutants injected into the grid. CPPs should take up remedial measures like installation of capacitors, filters for harmonics etc. so as to limit grid pollution. The Central Electricity Authority (Technical Standards for Connectivity to the Grid) (Amendment) Regulations, 2019, Part IV mandates consumers to limit the injection of harmonics in accordance with certain prescribed standards. Consumers are also mandated to install power quality meters and share the data recorded with Discoms from time to time. Additionally, these regulations also mandate the measuring and metering of harmonics and other power quality parameters such as voltage sag, swell, flicker and disruptions periodically by the Discoms. This data shall be shared with consumers on a periodic basis.

The Forum of Regulators (FoR) has echoed this in its Power Quality Regulations, adopted by SERCs like Punjab and Madhya Pradesh. These regulations explicitly assign responsibility to:

• Grid operators, for monitoring harmonics being injected into the grid, and
• Captive generators, for filtering harmonics before injection.

In addition to harmonic filtration, some CPPs propose to adopt other mitigation strategies:

• switch to island-mode operation during periods of grid instability (Telangana);
• opt for switching on and off units in a sequential manner in emergency scenarios to minimise grid overload (Chhattisgarh); and
• employ interlocking facilities that trip the plant during power instability to prevent undue stress on the grid (Andhra Pradesh ERC Retail Supply Tariff Order for FY 2022-23).

To effectively minimise grid pollution, installation of proper power quality monitoring equipment would be required to gauge the extent of grid pollution. In this vein, the APTEL in its aforementioned Order dated 30.05.2024 stated that with the modern grid being larger, more reliable and more stable, it is now necessary to conduct studies and check the actual impact of parallel operation on the grid. Though the order continued to uphold POC as a result of the aforementioned Supreme Court judgment upholding the same, the APTEL did find substantial reason in the arguments of the appellants opposing POC. The appellants also furnished detailed schemes with protective equipment lists which would ensure zero disturbance to the grid.

To sum up, with respect to the various issues argued as to the levy of POC, the table below shows what the Supreme Court, the APTEL and the SERCs have upheld.

Table 7: Summary of what different forums have upheld with respect to POC

Authority	Key Decisions / Observations
Supreme Court	- Levy of POC/GSC upheld in the Andhra Pradesh ERC order of 08.02.2002 – Parallel operation is a service provided by the grid for which it must be compensated. - POC/GSC leviable at the instance of Discom – clarifies earlier contention of CPPs as to right of Discom vs right of SLDC. - State Commission has power to determine POC/GSC.
APTEL	- POC to be levied only on co-located CPPs. - POC payable on installed capacity. - No exemption for captive cogeneration; exemption for wind and small hydro.
SERCs	- POC leviable only on co-located CPPs – grid pollutants get injected into the grid at the point of common coupling; standalone and off-grid plants exempted. - OA and PPA quantum to be excluded from computation of POC, sometimes auxiliary consumption as well.

Source: Prayas (Energy Group) compilation from various judgments and orders of SERCs, the APTEL, and the Supreme Court

What is clear so far is that despite over a decade of litigation, the levy of POC remains a fragmented and often contradictory domain. This is further compounded by the recent APTEL Order dated 27.01.2025 in Appeal No. 186 of 2017 where the APTEL has confirmed POC to be leviable on both captive as well as non-captive load. The regulatory landscape now stands at odds with its own past. This brings us to a point where we must rigorously assess whether POC is indeed a feasible solution towards measuring grid support costs.

4. A Case for Rethinking POC

The existing framework for levying POC reveals several fundamental shortcomings. Beyond variation in nomenclature and operationalisation; the framework is weakened by a lack of robust supporting evidence, especially in recent years with significant network investment and growing proliferation of RE captive. Studies such as those undertaken by ERDA, which have influenced regulatory decision-making, suffer from significant limitations, including small sample sizes and insufficient consideration of RE CPPs. There is a pressing need for more comprehensive studies to justify the imposition of the charge.

It is possible that utilities are using this framework strategically. By first securing regulatory approval for a nominal POC, Discoms could be aiming to establish a precedent, enabling them to seek significant increases to the charge at a later stage. In this light, the initial levies appear less about immediate revenue generation and more about setting up a long-term structure to source revenue from CPPs who currently escape charges such as AS and CSS. This also points towards the lack of critical compensatory mechanisms for Discoms.

A deeper concern is the absence of a clear economic justification for why the charge should be imposed solely on CPPs that operate in parallel with the grid. Technical disturbances such as harmonics and voltage fluctuations are often referred to collectively as grid pollution and are system-wide issues not confined to CPPs alone. As such, the associated costs should be socialised among all consumers rather than being selectively charged to CPPs.

Given the above context, it is essential to rethink the current approach. A key alternative lies in strengthening and enforcing existing power quality regulations and socialising the cost of network investments required for the same. Till now, only a few states have notified power quality regulations. Further, technical concerns about grid disturbances can be more effectively addressed by implementing strict standards on harmonics and voltage. For example, the Odisha Grid Code, 2006, already lays out detailed provisions for maintaining quality supply in the grid system. Regulation 4.7 specifically describes the ideal behaviour expected of grid constituents and tasks OPTCL with a "watchdog" role in monitoring and analysing the pollutants injected into the system. Rather than levying contract demand-linked charges, a more targeted regulatory approach that penalises instances of non-compliance with power quality standards could offer a fairer and more effective solution.

Given that the intent of POC is to compensate the Discom for services provided by them, it would prove useful instead to revamp the existing standby charge and banking frameworks to reflect the costs of Discoms. Catering to unplanned overdrawal is also a critical issue. In most states, standby charges are not differentiated on the basis of “type of service” (like, in this case, POC for parallel operation). The standby charge framework focuses more on the nature of service - be it planned, unplanned, short notice etc. Since standby services require investments from the Discoms, availing standby supply would require subscription to the said framework.

Presently standby charge levied on captive consumers is about 25% higher than the tariff levied for the consumer category. This charge is in line with the FoR Model Regulations on Methodology for calculation of Open Access charges and Banking charges for Green Energy Open Access Consumers. However, in many states, this could prove to be concessional. For instance, the marginal cost of procurement in states can be around ₹8-10 per unit. However, with this formulation, the additional revenue from the charge would only be ₹2-2.50 for standby power utilised.  In addition, standby charges are typically applicable for standby services availed within a 24-hour period with all other standby being charged at regulated tariffs. Thus, as per the present standby charges applicable on renewable energy captive, there is no distinction between planned and unplanned standby.

Two states are exceptions to this trend as they have adopted a standby charge framework with an opt-in commitment charge along with separate charges for planned and unplanned standby as detailed in Table 8.

Table 8: Standby framework in Punjab and Maharashtra

Punjab

Maharashtra

● Commitment charge framework requiring mandatory monthly commitment charges (ranging from ₹35–60/kVA) – approximately 20% of the demand charges. ● For availing standby power up to 80 days in a financial year. ● Energy charges based on consumption when standby power is utilized. ● Fixed charges levied daily for the number of days standby service is opted for.

● Four-tier differential standby charge system for captive consumers. ● Nature – additional fixed (demand) charges. ● When standby is not used – 25% of monthly demand charges (around ₹140/kVA) paid by all consumers. ● When standby is requested but not used – 100% demand charges. ● When recorded demand > contract demand – 150% of demand charges. ● When standby not opted for but service still provided – 200% of demand charges.

Source: Green Energy Open Access Regulations in India: A State-wise Analysis. ETPI.

The current POC framework reflects a deeper tension between the need to ensure grid stability, secure Discom revenues, and ensure competitiveness for CPPs. The absence of uniformity, the lack of robust evidence-based studies, and the partial targeting of CPPs all point to the need for a thorough rethinking of the framework. Future regulatory approaches must take cognisance of emerging metering technologies, increasing decentralised generation in the grid and push for a framework that provides certainty, clarity and compensation for services provided. This will encourage long-term investments in renewable energy whilst also protecting Discom viability.

ANNEXURE

Table A: SERC Orders Upholding the Levy of POC/GSC

S.No.	Petition/Appeal No.	Date of Order	SERC
1.	O.P. No. 1 of 1999	08.02.2002	APERC
2.	Petition No. 03/2006	15.02.2006	CSERC
3.	Petition No. 50 of 2010	10.09.2010	MPERC
4.	PETITION NO.256/2003 & 867/2006	01.06.2011	GERC
4.	SMP No. 73/2012 (quantum decided)	31.12.2012	MPERC
5.	M.P. No.10 of 2018	04.01.2019	TNERC
6.	Petition No. RERC 1541/19, 1542/19, 1543/19	06.02.2020	RERC
7.	O. P. Nos. 80 & 81 of 2022	27.03.2024	TGERC
8.	Petition No. RERC/2239/2024	03.10.2025	RERC

Table B: SERC Orders indicating the Official Levy of POC/GSC

S.No.	Petition/Appeal No.	Date of Order	SERC
1.	Petition No. 03/2006	15.02.2006	CSERC
2.	PETITION NO.256/2003 & 867/2006	01.06.2011	GERC
3.	Order No 4 of 2014	12.09.2014	TNERC
4.	O. P. Nos. 80 & 81 of 2022	27.03.2024	TGERC
5.	O.P. Nos 71, 72 & 73 of 2023	11.03.2024	APERC

 

The authors thank Ashwin Gambhir, Shantanu Dixit, and Sreekumar Nhalur, for their valuable inputs and review of this document. The authors would also like to thank Cheta Sheth and Varun Nair for proofreading this document and providing helpful feedback.   Comments and suggestions on the series are welcome and can be addressed to This email address is being protected from spambots. You need JavaScript enabled to view it.