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Ministry of Power Notifies Electricity (Amendment) Rules, 2026

Posted by admin on 2026-03-20 13:18:11 |

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The Ministry of Power has notified the Electricity (Amendment) Rules, 2026 on 13 March 2026, introducing important changes to the regulatory framework governing Captive Generating Plants (CGP) under the Electricity Rules, 2005. Certain provisions relating to proportionate consumption and verification will come into effect from 1 April 2026.

These amendments provide greater clarity on ownership, captive consumption, group company treatment, special purpose vehicle (SPV) structures, and the verification of captive status.

Highlights

1. Broader definition of “captive user”

The term captive user now includes an end user consuming electricity generated from a captive plant either directly or through an Energy Storage System (ESS). Further, where the captive user is a company, its subsidiaries, holding company, and fellow subsidiaries under the same holding company will be treated collectively as a single captive user.

2. Core CGP eligibility conditions retained

A power plant will qualify as a Captive Generating Plant only if:

• the captive user(s) hold at least 26% ownership; and
• the captive user(s) consume at least 51% of the aggregate electricity generated during the financial year for captive use.

3. Specific recognition for SPV-based projects

Under these amended rules, SPV-based captive plant would be examined using the AOP-style framework in the rule, including collective satisfaction of the ownership and consumption conditions, along with the proportionate consumption principles where applicable.

But one important nuance: In the case of a generating station owned through a Special Purpose Vehicle (SPV), the amendment clarifies that identified unit(s) of the generating station may qualify as captive, instead of requiring the entire generating station to meet the captive criteria. Ownership and consumption thresholds will be assessed with reference to the identified unit(s).

4. Important clarification for Association of Persons (AOP) structures

For power plants set up by an Association of Persons (AOP):

• the 26% ownership and 51% consumption requirements must be met collectively;
• an individual captive user’s eligible captive consumption will generally be limited to 100% of its proportionate consumption, based on its ownership share;
• however, where an individual captive user holds not less than 26% ownership, the proportionate consumption restriction will not apply to such user.

5. Weighted average shareholding for mid-year ownership changes

Where the ownership pattern changes during the financial year, the proportionate consumption of each captive user will be determined based on the weighted average shareholding during that year.

6. Consequences of non-compliance

If the captive plant fails to satisfy the prescribed conditions during the financial year, the electricity generated by the plant will be treated as supply by a generating company, and Cross Subsidy Surcharge (CSS) and Additional Surcharge will become applicable. Further, in AOP structures, any consumption by an individual captive user in excess of its eligible proportionate limit will also be treated as supply and may attract the applicable surcharge.

7. Formal verification mechanism introduced

The amendment introduces a structured mechanism for verification of captive status:

• where the plant and captive user(s) are located within the same State, verification will be carried out by the nodal agency designated by the State Government;
• where the plant and captive user(s) are spread across more than one State, verification will be carried out by the National Load Despatch Centre (NLDC).

8. Interim relief pending verification

Pending verification of captive status, CSS and Additional Surcharge will not be levied, subject to submission of the required declaration by the captive user(s). However, if the plant subsequently fails verification, the applicable surcharge along with carrying cost / late payment surcharge will become payable.

Why these matters

These amendments are significant for captive power producers, open access consumers, group captive structures, and SPV-based renewable projects. The revised rules aim to bring greater regulatory certainty, especially in relation to:

• treatment of group entities as a single captive user,
• eligibility of identified units in SPV structures,
• individual vs collective consumption limits in AOP arrangements, and
• a clearer verification and appeal framework.

Conclusion:

We request our clients operating under group captive, multi-state captive, or SPV-based renewable arrangements should review their current ownership and consumption structures in light of these amendments. Particular attention should be given to proportionate consumption compliance, shareholding changes during the year, and the likely verification requirements under the new framework.