MERC Approves Customized Bidding Framework for Long-Term Hydro Procurement by Tata Power-Distribution

18.06.2026

The Maharashtra Electricity Regulatory Commission (“MERC”) has, by its Order dated 16 June 2026 in Case No. 221 of 2024, approved Tata Power Company Limited – Distribution Business (“TPC-D”) to initiate a competitive bidding process for procurement of 200 MW of dispatchable hydro power on a long-term basis and has also approved a customized bidding framework specifically designed for long-term hydro power procurement.

The Petition was filed by TPC-D seeking approval to procure 200 MW of hydro power to meet its future Hydro Purchase Obligation (“HPO”) requirements and anticipated demand growth. It was submitted before the commission that while the Ministry of Power has issued Standard Bidding Documents (“SBDs”) for medium-term power procurement, there is presently no notified SBD for long-term hydro power procurement. Consequently, TPC-D developed a bespoke bidding framework tailored to the unique technical, operational and commercial characteristics of hydro power projects.

While examining the proposal, MERC observed that the absence of a notified SBD for long-term hydro procurement cannot be a ground to prevent competitive procurement under Section 63 of the Electricity Act, 2003. The Commission noted that TPC-D had undertaken a detailed exercise to adapt the existing medium-term bidding framework and had also considered the hydro procurement model approved by the Uttar Pradesh Electricity Regulatory Commission (“UPERC”) for large-scale hydro procurement. MERC held that the approval sought by TPC-D could not be viewed as a deviation from an existing Government-notified SBD since no such framework currently exists for long-term hydro procurement.

In approving the bidding framework, MERC also permitted several hydro-specific features that deviate from the conventional Medium-Term SBD. These include a 30-year procurement term, a tariff structure permitting independent quotation of fixed and variable charges, recovery mechanisms linked to the design energy of the hydro project, seasonal scheduling and performance obligations, the concept of “dispatchable contracted capacity” to ensure availability during peak demand periods, and provisions enabling procurement of hydro power from projects located outside India, subject to applicable Government approvals and regulatory requirements. The Commission found that these features were necessary to reflect the operational realities of hydro power projects while safeguarding competition and consumer interests.

Importantly, MERC recognized that hydro power projects possess distinct characteristics that require a procurement framework different from conventional thermal or medium-term power procurement. The Commission observed that the proposed framework was intended to improve project viability, encourage developer participation and ensure long-term availability of dispatchable renewable energy for consumer.

The Commission ultimately approved TPC-D’s Draft Long-Term Dispatchable Hydro Power Bidding Document and allowed TPC-D to proceed with competitive bidding for procurement of 200 MW of dispatchable hydro power. MERC further directed TPC-D to approach the Commission separately for tariff adoption and approval of the Power Purchase Agreement upon completion of the bidding process.

Key Takeaway

The Order is a significant regulatory development for the power sector as it recognizes that, in the absence of Government-notified bidding documents for a particular technology, distribution licensees may develop technology-specific procurement frameworks tailored to market realities, subject to regulatory scrutiny. The decision also marks an important step towards facilitating long-term hydro power procurement and broadening the avenues available to distribution licensees for meeting future renewable and hydro purchase obligations.

TPC-D was represented by Mr. Shri Venkatesh (Founding Partner), Mr. Ashutosh K. Srivastava (Partner), Mr. Mohit Mansharamani (Counsel), Mr. Ashirwad Sapre (Senior Associate).