The Maharashtra Electricity Regulatory Commission (MERC) has adopted a weighted average tariff of ₹4.08 (~$0.049)/kWh for Maharashtra State Electricity Distribution Company’s (MSEDCL) composite tender to procure 1,600 MW of thermal power and 5,000 MW of solar power.

The Commission has finalized a tariff of ₹5.39 (~$0.065)/kWh for thermal power, which includes a fixed charge of ₹3.67(~$0.044)/kWh and a fuel charge of ₹1.72 (~$0.021)/kWh. The tariff for solar power is set at ₹2.70 (~$0.033)/kWh.

Background

MSEDCL floated a tender on March 13, 2024, receiving four bids totaling 16,500 MW capacity.

The financial bids were opened on August 7, 2024, with quoted weighted average tariffs ranging from ₹4.38 (~$0.053)/kWh to ₹4.86 (~$0.058)/kWh.

The tender process faced legal challenges, with a Public Interest Litigation filed in the Bombay High Court questioning its validity. However, as no stay was granted, MERC proceeded with its evaluation.

Adani Power emerged as the lowest bidder, quoting ₹5.39 (~$0.065)/kWh for thermal and ₹2.70 (~$0.032)/kWh for solar power.

The composite tender aimed to offset higher thermal costs with cheaper solar tariffs.

An e-reverse auction conducted on September 9, 2024, led to the final discovery of ₹4.08 (~$0.048)/kWh weighted average tariff.

Commission’s Analysis

The Commission noted that MSEDCL conducted a transparent, competitive bidding process per the guidelines notified by the Government of India.

MSEDCL prepared bidding documents for thermal power procurement based on Guidelines dated March 6, 2019, and Model Bidding documents dated March 5, 2019. For solar power procurement, MSEDCL followed Guidelines dated July 28, 2023.

The Commission approved the concept of composite procurement, noting that the cheaper solar tariff would offset the higher per-unit cost of thermal power. This approach is expected to lead to a reduction in MSEDCL’s average power purchase cost.

To ensure the weighted average tariff is maintained throughout the PPA period, MSEDCL has provided a compensation mechanism in the solar PPA.

For thermal power, MERC compared the discovered tariff of ₹5.39 (~$0.064)/kWh with recent offers from NTPC (₹5.49/kWh) and Mahanadi Basin Power (₹5.20 (~$0.062)/kWh), concluding that Adani Power’s bid was competitive.

For solar power, the discovered tariff of ₹2.70/kWh was compared with recent SECI tenders [ranging from ₹2.47 (~$0.029) to ₹2.58 (~$0.030)/kWh] and GUVNL tenders [₹2.62 (~$0.0313) to ₹2.67(~$0.0319)/kWh]. While slightly higher, MERC noted that interest rates and off-taker risk profiles could justify the difference.

The Commission found the overall weighted average tariff of ₹4.08 (~$0.048)/kWh reasonable and reflective of current market conditions.

In June this year, the MERC ruled in favor of TPSL, declaring the increase in GST rates as a “Change in Law” event for its 300 MW wind-solar hybrid power project.

In July 2024, the Commission also approved MSEDCL’s petition to procure 5,000 MW of solar and 1,600 MW of thermal power.