5 Things You Should Know About the Electricity (Amendment) Rules, 2026

The Ministry of Power has recently notified the Electricity (Amendment) Rules, 2026, with the primary objective of bringing greater clarity to the regulatory framework governing captive power plants. The amendments seek to redefine the applicability of captive status, particularly for groups of companies, subsidiaries, and associations of persons.

The proposed rules, which will come into effect from April 1, 2026, also aim to clarify provisions related to captive power generation through Special Purpose Vehicles (SPVs), which are widely used by companies for developing large renewable energy projects. The amendments primarily introduce changes to Rule 3 of the Electricity Rules, 2005.

The ministry noted that the Electricity Rules, 2005 were amended in June 2023 to extend the benefits of captive consumption to groups of companies by permitting greater flexibility in capital structures. However, interpretational challenges emerged while extending captive consumption benefits to groups such as subsidiaries and holding companies under flexible ownership arrangements. The latest amendments attempt to address these issues.

The following are the five key takeaways from the amended rules:

1. Definition of Ownership

Under the proposed amendments, captive power plant owners will include subsidiaries, the holding company, and other subsidiaries of the holding company of the entity that has established the captive generating station.

In its explanatory note, the ministry stated that this change will ensure that genuine corporate entities are not denied captive status benefits merely due to their organisational or ownership structures.

2. More Realistic Assessment Period

The amended rules state that the assessment of captive power plants will be carried out with reference to the actual operational period during which the plant qualifies as a captive power plant, rather than on a rigid full financial year basis.

During the assessment period, the proportionate entitlement of each shareholder will be calculated based on the weighted average shareholding held by that shareholder over the course of the period.

3. Captive Plants Set Up by an Association of Persons (AoP)

For captive power plants established by an Association of Persons (AoP), the rules allow each captive user to draw power based on its operational requirements. Eligibility for captive consumption will be linked to proportional consumption aligned with ownership, without imposing disqualification if consumption falls below or exceeds specific thresholds.

The ministry clarified that there will be no disqualification due to disproportionate consumption by individual users. However, any energy consumed beyond the proportionate consumption limit will not qualify as individual captive consumption.

4. Treatment of Special Purpose Vehicles (SPVs)

The amended rules specify that Special Purpose Vehicles (SPVs) will be treated as an Association of Persons (AoP) for the purpose of captive generation. According to the ministry, this clarification will eliminate interpretational ambiguities and ensure consistency in the treatment of SPVs, which are extensively used by industries to develop captive and non-fossil fuel-based energy projects.

5. Captive Status Verification

The revised rules empower states to designate a nodal agency for verifying captive status for intra-state captive consumption. For inter-state captive consumption, the verification will be carried out by the National Load Despatch Centre (NLDC).