MERC grants AEML-D in-principle approval to recover power purchase cost overrun (~139% of approved cost) in FY2022-23 via FAC, and sets Rs.6/unit ceiling for short-term power
Case of Adani Electricity Mumbai Ltd.- Distribution for in principle approval for procurement of additional power procurement under Section 86 (1) (b) of the Electricity Act, 2003 read with Regulation 22 of MERC (Multi Year Tariff) Regulations 2019.
AEML-D sought prior approval under Section 86(1)(b) of the Electricity Act, 2003 and Regulation 22 of MERC MYT Regulations 2019, as its power purchase cost for FY2022-23 was estimated/actual to exceed 105% of the cost approved in its MYT Order dated 30 March 2020 (Case 325 of 2019). Reasons cited: high-cost banking power return (Rs.4.03-4.21/unit), surging spot market prices (coal shortage, high imported coal/gas prices, record demand of 207.11 GW), and delayed commissioning of a 700 MW wind-solar hybrid project forcing higher short-term purchases. AEML-D also sought approval of Rs.6/unit as estimated short-term procurement rate.
- Approved AEML-D's in-principle/prior approval for increase in power purchase cost beyond the 5% variation threshold under Regulation 22.3 for FY2022-23
- Noted actual cost variation was 157% in H1 and 122% in H2 (98% quantum vs 139% cost overall) against MYT-approved levels
- Accepted AEML-D's justifications (banking arrangement savings, market price surge, hybrid plant delay) as reasonable and beyond licensee's control
- Approved Rs.6.00/unit as ceiling rate for short-term power procurement for FY2022-23; any lower discovered tariff to be deemed adopted per Central Government competitive bidding guidelines
- No separate ruling needed on FAC pass-through since AEML-D confirmed it was already recovering cost via FAC mechanism
- Directed that detailed scrutiny of the increased cost will be undertaken during the upcoming Mid-Term Review (MTR) proceedings
- Detailed scrutiny of the excess power purchase cost to be taken up during upcoming Mid-Term Review (MTR) proceedings
- AEML-D to continue recovering increased power purchase cost through the Fuel Adjustment Charge (FAC) mechanism as per existing Tariff Regulations
- Short-term power procurement by AEML-D for FY2022-23 to be capped at Rs.6.00/unit ceiling; tariffs discovered below this deemed adopted
- ADTPS-related cost variations to continue to be handled separately under FAC per proviso to Regulation 22.3 (excluded from this 105% variation assessment)
- AEML-D's separately filed petition (Case 149 of 2022) for adoption of MTPP tariff already approved and to run in parallel
- • C&I consumers of AEML-D will see power purchase cost pass-through via FAC, reflecting sharply higher short-term/spot rates (up to Rs.6-7+/unit) rather than the Rs.3.50/unit assumed in tariff order — expect FAC-driven tariff increases
- • Establishes regulatory precedent (Rs.6/unit ceiling, comparable to Tata Power's Rs.7.54/unit) that Mumbai discoms may seek for short-term procurement, useful benchmark for open-access/C&I price expectations
- • Delay in 700 MW wind-solar hybrid commissioning underscores continued reliance on costlier short-term/spot power, reinforcing the case for C&I open-access RE or storage procurement to hedge against FAC volatility
- • MTR proceedings will further scrutinize these costs — C&I stakeholders should track MTR outcomes for retrospective true-up impacts on tariffs/FAC recovery
This is a routine but consequential FAC-enablement order: MERC has essentially blessed a ~39% cost overrun in AEML-D's FY23 power purchase, driven by external factors (coal/gas prices, demand surge, delayed RE capacity) rather than mismanagement, and capped short-term procurement at Rs.6/unit. For C&I buyers, the real signal is continued FAC volatility and a structural push toward medium-term PPAs (500 MW MTPP at Rs.5.98/unit) to reduce short-term exposure — a trend open-access and captive RE/storage developers should actively pitch against as a hedge for AEML-D's C&I base.
Growthifye does not take responsibility for the accuracy of this information. Values are compiled from tariff orders published on the websites of State Electricity Regulatory Commissions and distribution licensees (plus CEA / MoP / Grid-India), parsed automatically and shown with their source. Always verify against the signed order before any commercial decision. This one-pager is a Vidura-assisted summary of the official order; the signed order prevails.