TNERC Approves 1,000 MW Medium-Term Power Procurement To Meet Tamil Nadu’s Rising Electricity Demand

The Tamil Nadu Electricity Regulatory Commission has approved a medium-term power procurement plan proposed by the Tamil Nadu Power Distribution Corporation Ltd for buying 1,000 MW of electricity for five years starting April 1, 2026. The power will be sourced only from generators located within Tamil Nadu. The move is aimed at managing growing electricity demand in the state, easing transmission corridor constraints, and ensuring the availability of reactive power support.

The approval comes at a time when Tamil Nadu is witnessing a sharp rise in power demand. Data submitted to the Commission shows that the state’s all-time peak demand increased from 17,563 MW in 2022–23 to a record 20,830 MW in May 2024. This demand has crossed the levels projected earlier by the Central Electricity Authority. The rise is mainly driven by rapid industrial growth, increase in population, higher use of cooling appliances due to rising temperatures, and the expanding adoption of electric vehicles.

TNPDCL informed the Commission that while daytime electricity needs are largely met through a mix of conventional and renewable energy, the situation becomes challenging during evening peak and night hours. Solar and wind power, which form a large part of the state’s energy mix, are infirm in nature and cannot be relied upon during these periods. As a result, the utility often has to buy short-term power from electricity exchanges at very high prices, ranging from Rs. 8 per unit to Rs. 10 per unit.

By entering into a medium-term contract through competitive bidding, TNPDCL expects to secure power at a more stable and affordable rate. The utility has estimated that the cost under this arrangement could be around Rs. 5.50 per unit, which would help reduce dependence on costly short-term purchases and bring greater price certainty.

The Commission also took note of future supply challenges. According to studies by the Central Electricity Authority, Tamil Nadu is likely to face an energy deficit up to 2034–35, with unserved energy possibly reaching 45,587 million units. Several major power projects, including Ennore SEZ and Udangudi, have been delayed. In addition, long-term power purchase agreements totaling 2,830 MW are expected to expire by 2028–29, further tightening supply.

TNERC approved certain deviations from the Standard Bidding Documents requested by TNPDCL. These changes relate to payment security mechanisms such as Letters of Credit and provisions for damages if generators fail to meet the required availability. The Commission observed that procuring power from within the state will help reduce transmission congestion and avoid Inter-State Transmission System charges.

However, the Commission also pointed out that TNPDCL had floated the tender on November 11, 2025, before seeking regulatory approval. While granting approval in this case, TNERC directed the utility to strictly follow due process for future procurements. The Commission also advised TNPDCL to explore technologies such as Battery Energy Storage Systems and AI-based demand forecasting tools to better manage peak demand and integrate renewable energy. TNPDCL has been directed to file a separate petition for the adoption of the tariff discovered through the bidding process.