I plan to replace power factor correction capacitors inside a wye-delta starter. Existing capacitors were damaged due to a wiring fault. 26-218 2(d) does not let me put capacitors on the load side of the starter if it is wye-delta starting, but I am replacing existing capacitors, installed by the manufacturer. What gives? Why cant I do this in the field, when it is an accepted industry practice? Any ideas out there? Thanks.

If I were replacing parts on CSA approved equipment, I would do it in a manner that would restore the equipment to the condition at which it was approved. I don't think that it is up to us to question the CSA approval.

As to it being an industry practice - perhaps it isn't a good practice.

Ok it has been 15 years since I last wired a Y / delta starter but from memory the y has windings that are shorted in y then open and reconnect delta. So there is a moment where there is no voltage on the wires that were shorted at the y point. Put a capacitor across the output and it would discharge during the transition possibly creating a problem. If I recall, the capacitors should not be connected until the motor reaches operating speed. There may also be tourque issues but on that point I think I am confusing the capacitor in single phase motors with power factor correction capacitors.
I might ask if a factory supplied y/delta with PF correction does not have a set of contacts that don't close until after the motor is Delta?

The starter is wired in such a way that the capacitors come online when motor has completed its transition from wye to delta. 26-218 refers to overvoltages and overtorques, reclosings, jogging etc. But because the caps come online after transition, and there is no way these machines I am working with are going to be jogging frequently, I dont see the problem.

So Jay I gather your starter is an approved unit that does not connect the capacitors until the motor is to operating mode. So I see no violation here. Approved starter with PF correction included is not the same as making one yourself. Make one yourself and you would be in violation.