I wouldn't be surprised if the law dated back to electrification and specifically existed to grandfather in mills that had independent electrical supplies befor

I wouldn't be surprised if the law dated back to electrification and specifically existed to grandfather in mills that had independent electrical supplies before the grid was established - like a textile mill with a water wheel that hooked the axle up to a generator. Remember too that AC vs. DC was very much up in the air in the early days of electricity so any early investors in generators would have to gamble on which standard would win for transmission and some of them would end up being incompatible with the grid unless they installed transformers. A sane government would want to allow those early adopters to keep using what they've got until it breaks and not penalize those companies for investing in new technology.