Govt. Notifies Electricity Amendment Rules 2026, Clarifies Captive Power Ownership and Consumption Norms

The Government has notified the Electricity (Amendment) Rules, 2026, amending Rule 3 of the Electricity Rules, 2005 to clarify ownership structures, consumption norms and verification procedures for captive generating plants under the Electricity Act, 2003. The amendments aim to address interpretational challenges in group captive models and align the regulatory framework with evolving corporate structures and industrial energy requirements.

Under the revised rules, a power plant will qualify as a captive generating plant only if at least 26 percent of the ownership is held by captive users and a minimum of 51 percent of the electricity generated annually is consumed by them. The notification clarifies that ownership may include a company’s subsidiaries, its holding company, and other subsidiaries of the same holding company, which will collectively be treated as a single captive user. Electricity consumed through an energy storage system connected to the captive plant will also be recognised as valid captive consumption.

The amendment further states that Special Purpose Vehicles (SPVs) set up exclusively to own and operate generating stations will be treated as an Association of Persons (AoP). In such arrangements, captive users are generally required to consume electricity in proportion to their ownership share. However, if an individual captive user holds 26% or more ownership in the plant, the proportional consumption requirement will not apply and the entire electricity consumed by that user will qualify as captive consumption.

A structured framework for verification of captive status has also been introduced. Where the captive generating plant and the captive user are located within the same state, verification will be carried out by a nodal agency designated by the state government. In cases involving inter-state captive consumption, verification will be undertaken by the National Load Despatch Centre in accordance with procedures approved by the central government. Appeals against verification decisions will be addressed by a grievance redressal committee constituted by the appropriate government.

The rules also provide that cross-subsidy surcharge and additional surcharge will not be levied while captive status verification is pending, provided the captive users submit the required declaration. If the plant ultimately fails to meet the captive eligibility conditions for the relevant financial year, the applicable surcharges along with carrying cost will become payable. Certain provisions relating to proportional consumption under AoP structures and the new verification mechanism will take effect from 1 April 2026.

Commenting on this amendment, Rupal Gupta, Founder, Managing Director and Chief Executive Officer, TrueRE Oriana Power Ltd., said, “The Ministry of Power’s notification of the Electricity (Amendment) Rules, 2026, are a positive step toward making group captive renewable projects more practical and scalable. Allowing the 51 percent consumption requirement to be met collectively rather than individually will help reduce compliance risk and provide greater flexibility for developers and consumers. It can also help improve the financial viability and bankability of such projects. The shift to an operational-period compliance window and the removal of surcharges during the verification phase will also help reduce regulatory uncertainty. Streamlining the approval process and implementing uniform practices across the country will be crucial for the seamless execution & success of amended Rules."

He further added, "These Rules will enable more C&I consumers to participate in group captive renewable energy projects, encourage the development of larger captive renewable parks, and accelerate the adoption of clean energy by the C&I sector.”

The amendment is particularly significant for industries, manufacturing companies, group entities and other power-intensive businesses that set up captive power plants to reduce electricity costs and secure reliable power supply. By clearly defining ownership requirements, consumption thresholds and verification procedures, the government aims to minimise regulatory ambiguity, streamline compliance, and provide greater certainty to companies investing in captive generation projects.