MoP Issues Draft Amendments to Rule 3 of Electricity Rules 2005 on Captive Generating Plants

The Ministry of Power (MoP) has issued draft amendments to Rule 3 of the Electricity Rules, 2005, which governs the requirements for Captive Generating Plants (CPPs). 

The proposed changes, notified as the Electricity (Amendment) Rules, 2026, seek stakeholder comments from central ministries, state governments, regulators, power utilities, and industry bodies within 15 days, by January 17, 2026.

The draft amendments aim to remove long-standing ambiguities related to ownership structures, captive consumption norms, and verification mechanisms for CPPs, particularly in cases involving group companies, Special Purpose Vehicles (SPVs), and Associations of Persons (AoPs). Feedback is to be submitted to the Ministry of Power via email.

Under the proposed framework, captive users must collectively hold a minimum 26 per cent ownership in the generating plant, while at least 51 per cent of the electricity generated during the assessment period must be consumed for captive purposes. The definition of ownership has been expanded to explicitly include holding companies, subsidiaries, and group entities, ensuring that legitimate corporate structures are recognised for captive qualification.

To address operational realities across industries, the Ministry has proposed flexibility in determining the “assessment period.” Instead of restricting verification to a fixed financial year, the assessment period may now align with actual operational cycles, benefiting industries with seasonal or variable power consumption. Ownership and consumption entitlements will be calculated using a weighted average shareholding method over the assessment period.

The draft also brings clarity to the treatment of SPVs and AoPs. SPVs will be treated as AoPs for the purpose of captive verification. Individual captive users within an AoP will be allowed to draw electricity based on operational requirements. Consumption beyond proportionate entitlement will be counted for collective captive verification but will not qualify as individual captive consumption. However, any captive user holding 26 per cent or more ownership will be exempt from proportionate consumption limits, with all power drawn qualifying as captive.

In terms of verification, the amendments propose a clear division of responsibilities. Intra-state captive status verification will be conducted by nodal agencies designated by state governments, while inter-state captive plants will be verified by the National Load Despatch Centre (NLDC) with approval from the Central Government. Any disputes arising from verification may be referred to a Grievance Redressal Committee constituted by the appropriate government authority.

The draft further addresses the issue of cross-subsidy surcharge (CSS) and additional surcharge (AS). Pending verification of captive status, no surcharge will be levied if the generating company furnishes a declaration. However, if the plant ultimately fails to meet captive criteria, applicable surcharges along with carrying costs under the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, will become payable.

Another significant provision allows unit-level verification of ownership and captive consumption, rather than assessing the generating station as a whole. This is expected to provide greater flexibility for plants with multiple units or phased capacity development.

According to the Ministry, the amendments are intended to align captive power regulations with evolving corporate structures, industrial energy demand patterns, and administrative practices, while reducing litigation and compliance uncertainty. Provisions related to group captive consumption and nodal agency verification procedures will come into effect from April 1, 2026, while the remaining amendments will take effect immediately upon notification.

The consultation process builds on proposals issued in September 2025 and incorporates stakeholder feedback received to date. The Ministry has underlined that captive power generation plays a critical role in improving industrial competitiveness, enhancing energy security, and supporting India’s broader economic objectives.

Comments have been invited from organisations including MNRE, CEA, CERC, state energy departments, power distribution utilities, and industry bodies such as FICCI, CII, PHDCCI, and ASSOCHAM, along with academic and research institutions.