The Fairy Grouchmother appears in Sesame Street episode 4173. The Fairy Grouchmother is played by Grundgetta, which spoofs the Fairy Godmother, from most famous fairy tales. However, the character only appears in Abby Cadabby's imagination when she starts to think Oscar the Grouch isn't truly a Grouch, but really a prince who was transformed into a Grouch.
In Abby's imagination, she tells what she thinks is Oscar's fairy tale origin. He once was a handsome, kind prince who got trashy treasures from his subjects, till 1 day, a Fairy Grouchmother witness this & was disgusted. W/ a wave of her wand, she turned him into a nasty Grouch.