Captive Power Generation

A captive generating plant is a power plant established mainly to supply electricity for the owner’s own use. Section 2(8) of the Electricity Act, 2003 also includes a plant established by a cooperative society or an association of persons primarily for use by its members.

Statutory qualification test

The word “primarily” is quantified by Rule 3 of the Electricity Rules, 2005. Captive status is determined for each financial year through ownership and consumption tests.

• Captive users must hold at least 26 per cent ownership in the generating plant.
• Captive users must collectively consume at least 51 per cent of the aggregate electricity generated by the plant during the year.
• For a company or body corporate, ownership ordinarily refers to equity share capital carrying voting rights; in other cases, it refers to proprietary interest and control.
• Where only specified generating units are identified for captive use, the requirements are applied to those units independently.

Group and cooperative captive plants

A plant may serve several captive users rather than one owner, but collective ownership must correspond to genuine captive consumption.

• For an association of persons, users must collectively satisfy the 26 per cent ownership and 51 per cent consumption thresholds.
• Each member’s consumption must broadly correspond to its ownership share, subject to the permitted 10 per cent variation.
• For a cooperative society, the ownership and consumption requirements are satisfied collectively by its members.

Legal significance

Under Section 9, a person may construct, maintain or operate a captive generating plant and dedicated transmission lines. Captive users may obtain open access to carry electricity to their premises, and the cross-subsidy surcharge is not levied on electricity carried for their own use under Section 42(2).

• Captive status is assessed annually; failure to meet the prescribed tests results in loss of captive treatment for that year.
• Sale of surplus electricity does not by itself defeat captive status if the statutory ownership and captive-consumption tests remain satisfied.

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