Maharashtra power utility's 6600 MW power procurement tender faces regulatory scrutiny

Mumbai: The Maharashtra State Electricity Distribution Company Ltd's (MSEDCL) 6,600 MW tender for long-term power procurement has come under the security of Maharashtra Electricity Regulatory Commission (MERC).

In response to an application filed by the state power utility MSEDCL to seek approval for deviation in the standard bidding documents, the MERC has questioned the state power utility why the approval was not sought before initiating the bidding process, according to the regulator's June 25 order.

The state power regulator has directed the MSEDCL to demonstrate in quantifiable terms how the proposed deviations in the bidding documents are in the consumers' interest.

MSEDCL in March issued a tender to procure 1,600 MW thermal power and 5,000 MW of solar power in Maharashtra. This was just before the model code of conduct for the Lok Sabha elections kicked in.

The power procurement was for meeting the demand for 2033-34, i.e. 10 years from now.

The MERC in its order asked MSEDCL to clarify that as the proposed power procurement being undertaken to meet the demand of 2033-34 will start commissioning in the next 2 to 4 years, so would such early contracting create any stranded capacity.

The MERC also wanted to know whether the Maharashtra state power utility has tied up sufficient power to meet the projected demand before 2033-34, according to the order.

The MERC asked the MSEDCL to explain the rationale for considering combined power procurement of solar and thermal from a single entity. The Commission wants to know if all future thermal power procurements would follow the same principle.

According to the sources, MSEDCL is trying to conclude the tender submission in July, before the code of conduct is issued for the state elections, which are due in October 2024.

According to an industry source, projects of this scale would require an investment of around Rs 40,000 crore. Any interested party that wants to participate in the tender will have to obtain offers from equipment suppliers, tie up financing and also arrange for other project essentials such as land, water and transmission.

The tender does not afford sufficient time for the interested parties to arrange for these basic requirements, they said adding this may lead to restricted participation, which is not in the consumer's interest and might result in higher cost of power procurement and tariffs.

Allowing sufficient time for wider participation in the tender will always be in the interest of consumers, since the power requirement is starting in 2033, the source further added.

MSEDCL has been given 7 days to file submission on the queries raised by the MERC. The next date of hearing is on July 2, 2024.