MoP Notifies Amendment To Rule 3 (Requirements Of Captive Generating Plant) Of The Electricity Rules, 2005

The Ministry of Power (“MoP”) notified the Electricity (Amendment) Rules, 2026¹ (“Amended Rules”) on 13.03.2026 amending Rule 3 (Requirements of Captive Generating Plant) of the Electricity Rules, 2005 (“Rules”).

The salient features of the Amended Rules are as follows

1. The amended definition of ‘captive user’ expressly includes persons who consume electricity from a Captive Generating Plant (“CGP”) through energy storage system used to store energy generated through such CGP.
2. The definition of ‘ownership’ has been expanded to include indirect holdings through a captive users’ subsidiaries, holding company and other subsidiaries of that holding company. Further, corporate groups can now aggregate these holdings to stratify 26% ownership threshold without requiring a single entity to hold 26% directly.
3. It has been clarified that an SPV will be treated as an Association of Persons (“AoP”) for the purpose of Rule 3 of the Rules.
4. For the plants set-up by AoP, Rule 3(2)(d) of the Amended Rules provides for the following proportionate consumption requirements:
   1. The 26% ownership and 51% consumption conditions shall be satisfied collectively by all captive users. The aggregate consumption by all captive users from the plant is counted towards plant-level verification;
   2. The captive consumption by an individual captive user shall be admissible only up to 100% of its proportionate consumption, calculated with reference to its share in the total captive ownership of the power plant;
   3. The condition of proportionate consumption cap does not apply to any captive user who holds 26% or more of the shareholding in the power plant;
   4. If ownership changes during a financial year, a captive user’s proportionate consumption is calculated based on their weighted average shareholding during the said financial year; and
   5. For calculating proportionate consumption, a captive user and its group companies, are treated as a single captive user.
5. Rule 3(3) places an obligation on captive users to ensure compliance with the Rule 3(2) conditions. Where the minimum captive consumption requirement is not met, the entire electricity generated will be treated as supply by a generating company, attracting cross subsidy surcharge and additional surcharge. For AoP, any consumption by an individual beyond their 100% proportionate entitlement, that excess consumption is treated as supply by generating company and CSS and ASS apply on the excess consumption and not on the entire output.
6. Rule 3(4) outlines the statutory verification mechanism for captive status, i.e., (i) in case of CGP and all captive user(s) in the same State, verification will be done by nodal agency designated by the state government asper procedure issued by such agency; and (ii) in case of captive generator or captive user(s) located in more than once state, verification will be done by National Load Despatch Centre (“NLDC”) as per the procedure issued by NLDC with approval of the Central Government. An appeal against the verification as mentioned above will lie before Grievance Redressal Committee which will be constituted by the Appropriate Government.

The Amended Rules are applicable from the date of notification, i.e., 13.03.2026, while sub rules 3(2)(d)(ii), (iii) and 3(4) will come into force on 01.04.2026.

Footnote

1 Electricity (Amendment) Rules, 2026

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.