MoP Notifies Electricity (Amendment) Rules, 2026

The Ministry of Power (MoP), vide notification no. G.S.R. 186(E) dated March 13, 2026, has notified the Electricity (Amendment) Rules, 2026, substituting Rule 3 of the Electricity Rules, 2005 governing Captive Generating Plants (CGPs). The Amendment Rules address longstanding ambiguities relating to group captive structures, ownership, consumption and verification of CGPs, Association of Persons (AoP) arrangements and verification mechanisms for determination of captive status.

Key Highlights of the Rules

The Electricity (Amendment) Rules, 2026 retain the core eligibility criteria for captive status, requiring a minimum 26% ownership and 51% consumption of generated electricity during the financial year. The rules expressly recognise group companies including holding companies and subsidiaries as a single captive user, thereby aligning the framework with modern corporate structures. Special Purpose Vehicles (SPVs) are treated as Associations of Persons (AoPs), and captive qualification may be assessed at the unit level. 

The amendments introduce a proportionate consumption framework, linking consumption to shareholding, while exempting users with 26% or more ownership from such proportionality limits. A concept of weighted average shareholding has been incorporated to address changes in ownership during the year. 

The rules also establish a formal verification mechanism, with State nodal agencies handling intra-state cases and the National Load Despatch Centre (NLDC) overseeing inter-state arrangements, supported by an appeal process. Additionally, cross-subsidy surcharge (CSS) and additional surcharge (AS) are not payable pending verification, subject to prescribed declarations. To enhance clarity, the rules include illustrative examples in Schedule III.

The draft amendments to Rule 3 of the Electricity Rules, 2005 were published in January this year.

Key Changes from the Draft Amendments

The final rules largely reflect the proposals set out in the draft amendments, with no major policy departures. However, certain refinements have been introduced.

Most notably, the assessment period for determining compliance has been standardised to the financial year, replacing the more flexible, operational-period approach contemplated in the draft. This change is expected to improve consistency and ease of verification.

Further, while the draft provided detailed explanatory language on AoP flexibility and group structures, the final rules adopt a more precise and codified formulation, thereby reducing interpretational ambiguity but also limiting flexibility in application.

The recognition of group entities as a single captive user, which was a central feature of the draft, has now been formally embedded in the rules. Additionally, the roles of the State nodal agencies and NLDC in the verification process have been clearly delineated.