Electricity (Amendment) Rules, 2023

Introduction

The Ministry of Power, vide its notification dated 30^th June, 2023 released the “Electricity Amendment Rules, 2023” which have acted as an amendment to the earlier Electricity Rules of 2005.

There have been a number of major amendments through this notification which are as follows:

1. The amendment has provided a crucial provision which states that with the objective of boosting power generation along with restructuring the framework and norms of power generating plants, each captive user is mandated to hold at least a minimum of 26% stake in the captive power generation plant. This provision has updated the erstwhile provision which mandated all the captive users to collectively hold a total of 26% instead of an individual holding the said percentage.
2. Moreover, any captive generating project set up by an affiliate company also attracts a minimum of fifty – one percent ownership in the given affiliate company by the captive user.
3. According to an amendment in Rule 4, another 3 new rules, namely, Rules 4A, 4B and 4C have been inserted which provide that the period of license in case of a distribution licensee has also been updated to 25 years, at the end of which it would be deemed to get revoked unless the license – holder renews it. Moreover, the power to renew the license has been bestowed to the appropriate commission.
4. For the purpose of calculation of tariff, in accordance with Schedule – I, the rules have notified that the method of calculation would be based upon energy scheduled instead of energy supplied to the end procurer from the wind and solar power central pool through the intermediary procurer.
5. The amended rules have also added the definition of “captive user” under Rule 3, explanation to sub – rule (2), clause (b) wherein a captive user has been defined as “the end user of electricity generated in a captive generating plant and the term captive use shall also be construed accordingly.” Moreover, the provision to the same rule has also stated that the consumption of electricity by captive user may be either directly or through “Energy Storage System.”
6. Various miscellaneous additions through the amendments have also stated that a subsidiary company of a holding company shall also be eligible for being considered as a captive user.

This amendment has paved the way for allowing more subsidiaries of captive users to set up their captive generating plants and obtain benefits in form of cross subsidies waivers and enjoy an increased amount of flexibility. Moreover, the easing of licensing requirements would also attract an increased number of private players to invest in the industry and remove contingencies and ambiguities in the system.