Captive power generation rules amended

In a bid to strengthen captive power generation at a time of energy transition to sustainable fuels, the Union government on Saturday amended the Electricity Rules, 2005 to “remove ambiguities” related to the sector.

“The amendments seek to align the captive generation regime with modern corporate structures and evolving industrial energy needs, particularly as companies increasingly invest in non-fossil fuel based captive power projects,” the Power Ministry said in a statement. “By clarifying ownership provisions, simplifying rules for group captive arrangements, and establishing a clear verification mechanism, the amendments aim to reduce regulatory ambiguity and disputes,” it added.

Captive power generation involves industrial consumers producing electricity to meet their own needs rather than depending completely on the public grid.

One of the major amendments to the Rules is that the verification of captive status will now be undertaken for the entire financial year to ensure “clarity and uniformity in implementation.” States and Union Territories have been directed to designate a nodal agency to verify captive status, with effect from April 1, while the responsibility for inter-state captive power will rest with the National Load Despatch Centre.

Pending verification of captive status, cross-subsidy surcharge and additional surcharge will not be levied if the captive users submit a prescribed declaration. 

The amendments also provide greater flexibility in cases where multiple entities join hands to operate group captive power projects. Captive users will now be able to draw power based on their operational requirements, subject to overall compliance with ownership and consumption norms and will not be disqualified if an individual users’ consumption exceeds their proportionate entitlement.

The definition of ownership has also been clarified to include subsidiaries, holding companies and other subsidiaries of the holding company of the entity that establishes the captive generating plant, recognising modern corporate structures where power assets are often developed through group entities or special purpose vehicles. 

“The amendments are expected to promote ease of doing business, enable industries to access reliable and cost-competitive electricity through captive generation, reduce regulatory ambiguities and disputes, and encourage greater investment in captive and non-fossil fuel based energy projects,” the Ministry said, adding that the amendments were finalised after extensive stakeholder consultations.