The Ministry of Power has through its notification of June 30, 2023, notified the Electricity (Amendment) Rules, 2023 (“Amendment Rules”). The Amendment Rules will be effective from the date of their notification in the official gazette i.e., June 30. 2023. The Amendment Rules introduce the following key amendments in the Electricity Rules, 2005 (“Rules”):

1. The Amendment Rules amend Rule 3(a)(i) of the Rules which provides the requirements for a plant to qualify as a captive generating plant (“CGP”) under Section 9(8) and Section 2 of the Electricity Act, 2003 (“Act”). The amended Rule states that a power plant will be considered to be a CGP only if not less than twenty six percent of ownership of the plant is held by the captive user. However, if the CGP is being set up through an affiliate company, the captive user will have to own at least fifty one percent in such affiliate company. Further, the Amendment Rules also specifically revise ‘Captive User(s)’ in Rule 3(a)(i) to ‘Captive User’. While, in the absence of a statement of reasons, the intent behind such revision is not clear, it may suggest that each captive user is required to own twenty six percent of a CGP. Such an interpretation will have a significant impact on group captive project, as the implication would be that each captive user participating in a group captive project is required to own at least twenty six percent of the CGP.

2. The Amendment Rules also amend the definition of ‘Captive User’ provided in the explanation to Rule 3(2), to include the following as ‘Captive Use’:
   1. end user of the electricity generated by a CGP;
   2. consumption of electricity by captive user either directly or indirectly through energy storage systems; or
   3. consumption of electricity by a subsidiary company (as defined under Section 2(87) of Companies Act, 2013) of an existing captive user will also be considered as captive consumption by the captive user.

3. The Amendment Rules insert the following Rules after Rule 4 of the Rules in relation to the license granted under Section 14 of the Act:
   1. Rule 4A – It states that the period of a license granted under Section 14 of the Act will be in accordance with the terms and conditions laid down in such license by the Appropriate Commission.
   2. Rule 4B – It states that for deemed licenses under the first, second, and fifth proviso of Section 14 of the Act, the period of the license will be twenty five years from the date of the Act coming into force.
   3. Rule 4C – It states that the license granted by the Appropriate Commission under Section 14 and the license of the deemed licensee under the first, second, and fifth proviso of Section 14 of the Act, will be deemed to be renewed for a period of further twenty five years (or lesser time as requested by licensee) unless the same is specifically revoked. This clause shall not be applicable to license granted to transmission developers selected through tariff-based competitive bidding under Section 63 of the Act.

4. The Ministry of Power through the Electricity (Amendment) Rules, 2022 notified on December 29, 2022, had introduced Rule 19 in the Rules. Rule 19 provides for the implementation of the Uniform Renewable Energy Tariff for the Central Pool. The Amendment Rules further amend Rule 19 in the following manner:
   1. In the proviso to Rule 19(1)(c) the word ‘implementing agency’ has been replaced with ‘intermediary procurer’ to state that in case of nonpayment of tariff by the intermediary procurer within fifteen days of issue of monthly accounts statement, the carrying cost at the rate of State Bank of India Marginal Cost of Funds based Lending Rate plus five percent shall be payable for the period of delay; and
   2. In Rule 19(1)(m) the word ‘provide public’ has been replaced with ‘publish’ requiring the implementing agency to publish the monthly accounts statements and relevant details on its website.
   3. In Rule 19(2) the word ‘renewable energy generators’ has been replaced with ‘end procurers’ to make the uniform renewable energy tariff applicable to all end procurers for the contracted capacity which forms part of the central pool (End Procurers have been defined under the Rules to include persons to whom a license to undertake distribution and retail supply of electricity has been granted under section 15 of the Act or is designated by the State Government to procure power on behalf of the licensees undertaking distribution and retail supply of electricity or open access consumer).
5. The Amendment Rules amend Schedule I of the Rules which provides for the methodology for the calculation of tariff for the month.  Post amendment the tariff for a particular month is to be calculated based on energy scheduled to end procurer from the central pool by the intermediary procurer and the actual amount to be payable for such scheduled energy as illustrated in the Schedule.
6. The Amendment Rules also make certain referencing revisions in Schedule II of the Rules which provides for fuel and power purchase adjustment methodology.

Please find attached a copy of the Amendment Rules.

This update has been contributed by Rachika Agrawal Sahay (Partner) and Siddhant Satapathy (Senior Associate).

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