In pursuance with Section 176 of the Electricity Act, which empowered the Central Government to make rules for carrying out the provisions in the Act, the Central Government notified Electricity Rules, 2005 on 8th June 2005. Certain amendments were later made in these rules on 26th October 2005. The rules cover the requirements for classifying captive generation plant, coverage of asset/network items under distribution system, compliance with the direction of transmission licensee, surcharge on transmission fee, constitution of grievance redressal forum and appointment of ombudsman, clarity on regulation of generation tariff between CERC and SERC, clarity of inter-state and intra-state trading licenses, clarity on time period for appeal to appellate tribunal, clarity on jurisdiction of special courts vs. other courts in the absence of constitution of special courts, cognizance of an offence etc. On captive generation, these rules specify that any plant in which more than 26 per cent equity is held by the captive user(s) and more than 51% electricity on annual basis is consumed for captive use will be classified as a captive generation plant. This definition would hold collectively for members of a registered co-operative society and also for association of persons. According to a clarification issued by the Central Government on 6th August 2007, such plants would have open access under Section 9(2) of the Act subject to availability of adequate transmission facility and would not have to wait for open access being declared for certain class of consumers by SERCs under Section 42 of the act. The rules also clarified that in case a plant has multiple units the same principle can be extended to a single unit of a sub-set of units provided the above conditions are met on pro-rata basis.
The rules clarified that mere incidental use of parts of distribution system for transmission would not render them as not part of distribution system. The rules also specified that the direction given by load dispatch centres are binding on transmission licensee failing which all penal measures can be taken by the ERCs including taking control of their operation. The rules clarified that for any consumer entitled to open access by the SERC and using inter-state transmission, the surcharge determined by CERC for inter-state transmission would be in accordance with the surcharge on wheeling determined by the SERC. The rules laid out the process of formation of forum for redressal of consumer grievances, which would consist of licensee officers and an independent member nominated by SERC, under the guidelines issued. It also specifies the duty of the ombudsman to address grievances and to report compliance by the licensee to the SERC and the State Government. It clarifies that for the generators for whom the tariffs are set by CERC, SERC will not regulate tariffs but will have to decide whether the distribution licensee should procure power from such generators or enter into PPA with them. It clarifies that once a trader obtains inter-state trading license, the trader also can trade intra-state without obtaining a separate license for intra-state trading. It clarifies that till special courts are constituted for the sector, other courts will continue exercising their jurisdiction on the relevant provisions of the Act.