In a major setback for the Maharashtra Electricity Regulatory Commission (MERC), the Bombay High Court on Monday quashed its controversial review order of June 25, 2025, which had altered key provisions of the solar and renewable energy tariffs earlier fixed in March. The Division Bench of Justices B.P. Colabawalla and Firdosh P. Pooniwalla held that MERC acted "in breach of the principles of natural justice" by issuing the order without public consultation.
"The manner in which the review was conducted, without notice or hearing to affected parties, cannot be sustained in law," the Bench observed, emphatically directing that the matter be reconsidered only after stakeholders are duly heard.
Background
The dispute arose after the Maharashtra State Electricity Distribution Company Ltd. (MSEDCL) sought a review of MERC’s original Multi-Year Tariff (MYT) order dated March 28, 2025. That order had been passed following extensive public hearings and consultations with solar developers, industrial consumers, and renewable energy associations.
Barely four days later, MSEDCL moved MERC to stay its implementation. In an unusual move, MERC granted the stay on April 2, 2025 - without hearing any of the petitioners or consumer representatives. The Commission then went ahead to substantially modify the original MYT order through an ex-parte review on June 25, 2025.
The changes, among other things, restricted banking of solar power to specific "solar hours" (9 a.m. to 5 p.m.) and increased capital expenditure allowances by over ₹55,000 crore — a move critics said would inflate consumer tariffs.
Court’s Observations
The Bench was scathing in its criticism of the Commission’s approach. It noted that the Electricity Act, 2003 and the MERC’s own Transaction of Business (TOB) Regulations, 2022 clearly require notice and opportunity of hearing to all affected parties before any substantial tariff modification.
"The entire consultative process which was rigorously followed before the March 28 order was conveniently abandoned in June," the Court remarked, adding that such procedural shortcuts cannot be justified under the guise of regulatory discretion.
Read Also:- Bombay High Court Allows Herbal Hookah in Restaurants, Directs Police to Act Only Under Tobacco Law
It rejected MERC’s contention that tariff review is a "legislative or regulatory" act exempt from the principles of natural justice. “Even if the power is regulatory, when statutory regulations themselves prescribe a participative procedure, it becomes mandatory," the Court said.
The Bench also underlined the impact of the review on the renewable sector. By limiting solar energy banking to eight hours instead of seventeen, "the Commission had effectively changed the commercial dynamics of the sector overnight," the judgment recorded.
After an extensive hearing that saw top legal luminaries like Dr. Birendra Saraf, Darius Khambata, Janak Dwarkadas, Aspi Chinoy, and Sajan Poovayya argue across multiple petitions, the Court concluded that MERC’s review order "cannot stand the test of fairness or statutory compliance."
Accordingly, the Bench set aside the impugned review order dated June 25, 2025 and restored the original MYT order of March 28, 2025. However, it granted liberty to MERC to initiate fresh proceedings, provided it follows a transparent process, issues public notices, and invites objections and suggestions from all stakeholders.
Case Title: O2 Renewable Energy VII Private Limited & Others vs Maharashtra Electricity Regulatory Commission & Maharashtra State Electricity Distribution Company Limited
Court: High Court of Judicature at Bombay
Bench: Justice B.P. Colabawalla and Justice Firdosh P. Pooniwalla
