What happens if a captive power plant fails the 51% consumption test in a year?
If captive users consume less than 51% of the plant's generation in the financial year, all electricity from the plant is treated as supply by a generating company, and cross-subsidy surcharge and additional surcharge apply to it. If verification later fails, those surcharges are payable with carrying cost.
The test under the 2026 rules
- Captive users must hold at least 26% of the ownership of the plant, or of the units identified as captive.
- Captive users must consume at least 51% of the aggregate electricity generated in the plant during the financial year.
- Ownership includes subsidiaries, the holding company and the holding company's other subsidiaries, treated as one captive user.
- Consumption through a storage system that stored the captive plant's energy counts as captive use.
When the test fails
Rule 3(3): if the minimum captive consumption is not met in the year, the entire electricity generated by the plant is treated as supply by a generating company, and cross-subsidy surcharge and additional surcharge are levied on that consumption.
For a plant set up by an association of persons, such as a special purpose vehicle, consumption by one captive user above 100% of its proportionate share is treated as supply by a generating company and surcharged, even if the plant as a whole passes. A captive user holding at least 26% on its own is exempt from that proportionality limit.
Verification and carrying cost
- Verification is for the whole financial year, from 1 April 2026 under the new procedure.
- A nodal agency designated by the state verifies plants where plant and users are in one state; the National Load Despatch Centre verifies plants spanning states.
- Pending verification, surcharges are not levied if the captive users file the required declaration.
- If the plant then fails, the surcharges are payable with carrying cost at the base rate of late payment surcharge under the 2022 Late Payment Surcharge Rules.
Worked example from Schedule III of the 2026 rules
- Three captive users own 15%, 10% and 5% of an SPV plant (30% in total)
- They consume 33%, 28% and 9% of its generation (70% in total), so the plant passes
- Eligible limits are 70 x 15/30 = 35%, 70 x 10/30 = 23.33% and 70 x 5/30 = 11.67%
- The second user's consumption above 23.33% is surcharged as supply from a generating company
Taken from Example 1 of Schedule III to the Electricity (Amendment) Rules, 2026.
What Senseible does here
Senseible reads captive and open access units from your bills month by month, so you can see early in the year whether your share of the plant's generation is tracking above or below what the 51% test needs.
- Group captive rules for solar
- Group captive solar PPA and Scope 2
- Surcharge cap at 20% of cost of supply
Last reviewed 2026-10-23. Rule 3 of the Electricity Rules, 2005 as substituted by G.S.R. 186(E), 2026; parts in force from 1 April 2026 (checked 23 October 2026).