Captive Power Rules Conundrum

The Electricity Act, 2003 ("Act") defines 'captive generating plant' as a power plant set up by any person to generate electricity primarily for his own use and includes a power plant set up by any co-operative society or association of persons for generating electricity primarily for use of its members.¹

Further, Rule 3 of the Electricity Rules, 2005 ("Rules") provides the requirements that a power plant must meet to qualify as a captive generating plant. Mainly a power plant to qualify as a captive power plant (and, take the advantage of exemption of cross subsidy surcharge) must meet the 'ownership test' and the 'consumption test'. The ownership test is that captive users are required to own at least 26% in the captive generating plant; and the consumption test being that the captive users are required to consume at least 51% of the aggregate electricity generated from the power plant (to be determined on an annual basis).