Seeking comments on draft amendments proposed in Rule 3 (i.e Requirements of Captive Generating Plant) of Electricity Rules, 2005-reg. – EQ
Summary:
# What this draft does (at a glance)
* Seeks public comments on proposed changes to **Rule 3: Requirements of Captive Generating Plant** under the Electricity Rules, 2005. Letter of transmittal is from the Ministry of Power (Under Secretary), addressed to industry bodies and experts. *(p.1)*
* Draft is titled **Electricity (Second Amendment) Rules, 2025**; it becomes effective on publication in the Official Gazette. *(p.2)*
* Re-states core CPP thresholds and clarifies unit-wise identification:
* **Ownership:** Captive user(s) must hold **≥26%** of ownership. *(p.2, p.4)*
* **Consumption:** Captive users must consume **≥51%** of the electricity generated (on an **annual/financial-year** basis). *(p.4)*
* **Unit identification example:** In a 2×50 MW station, if Unit-A is identified as captive, captive users must hold **≥13%** of company equity (i.e., 26% proportionate to the 50 MW unit) and consume **≥51%** of Unit-A’s generation. *(p.4)*
* **Per-user “captive consumption benefit” cap & formula** introduced/clarified: each user’s captive benefit is capped at **110% of their proportionate entitlement**, computed as:
**Eligible captive consumption (%) = 1.1 × (X ÷ Xₙ) × Yₙ**
where **X** = that user’s ownership %, **Xₙ** = total ownership % of all captive users, **Yₙ** = total captive users’ actual consumption % of total ex-bus generation. *(p.3: table & header)*
* **Definitions/clarifications:**
* **“Annual basis” = financial year**; **“captive user” = end user** of power from the CPP. *(p.4)*
* **“Ownership”** covers equity share capital with voting rights (direct or via holding/subsidiaries). *(p.5)*
* **“Special Purpose Vehicle”** is defined as a pure-play generation entity. *(p.5)*
* **Multi-state CPPs**: captive status to be verified by **CEA** per its procedure with Central Govt approval. *(p.5)*
# Why it matters (implications)
* **Tightens per-user alignment**: The 110% cap curbs “over-draw” by any single user relative to their equity share, discouraging proxy wheeling through minority stakes. *(p.3)*
* **Unit-wise flexibility with proportionate equity**: Lets companies ring-fence one unit as captive, but enforces proportionate equity (e.g., 13% when only half the station is captive). *(p.4)*
* **Annual compliance risk**: Falling short of **either** 26% equity (proportionate) **or** 51% consumption in any year converts **all** generation to “supply by a generating company,” exposing it to open-access charges/levies. *(p.4)*
* **Group structures clarified**: Ownership via holding/subsidiaries is expressly recognized, but voting rights/control are key—mere economic interest won’t suffice. *(p.5)*
# Practical checklist for captive users
* Confirm **cap table** meets ≥26% (proportionate to the identified captive unit) with voting rights. *(p.2, p.4–5)*
* Track consumption **monthly**, report **annually (financial year)** to ensure ≥51% is met; put remedial plans if trending short. *(p.4)*
* Compute each user’s **eligible benefit** using **1.1 × (X/Xₙ) × Yₙ**; flag any user drawing above the cap. *(p.3)*
* For **multi-state** CPPs, line up documentation for **CEA verification**. *(p.5)*
# Points you could raise in your comments
1. **110% headroom—adequacy & rationale:**
* Is 10% cushion sufficient for annual variability, outages, or forecasting error? Consider proposing 115–120% or a **tolerance band** tied to PLF variability. *(p.3)*
2. **Treatment of partial-year events:**
* Clarify how the 51% test applies when plants/users are commissioned, de-merged, or added mid-year, given “annual basis” = financial year. *(p.4)*
3. **Proportionate equity rounding rules:**
* Request guidance on rounding (e.g., 12.6% vs 13.0%) in unit-wise scenarios to avoid disputes. *(illustration on p.4)*
4. **SPV and shareholder changes:**
* Ask for an explicit **grace period** to restore thresholds after intra-group restructurings so short, technical breaches don’t jeopardize captive status. *(p.5)*
5. **Verification mechanics:**
* For CEA verification (multi-state), request a **timeline**, required proofs, and an **appeal/escalation** pathway. *(p.5)*
6. **Data definitions for the formula:**
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