Review of Tariff Orders Must Adhere to Consultation Process: Bombay High Court Sets Aside Ex-Parte Order

The High Court of Judicature at Bombay has delivered a significant ruling reinforcing the necessity of procedural transparency in the energy sector. In a batch of petitions led by O2 Renewable Energy VII Private Limited , the bench comprising Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla quashed a review order passed by the Maharashtra Electricity Regulatory Commission (MERC), declaring it invalid for failing to follow the mandatory consultative process required by law.

The Backdrop: A Tariff Shift in the Dark

In March 2025, the MERC issued a Multi Year Tariff (MYT) Order following a transparent, public-consultative process. This order, covering the financial years 2025-2030, established crucial frameworks for renewable energy banking and industrial tariff classifications.

However, shortly thereafter, the Maharashtra State Electricity Distribution Company Limited (MSEDCL) filed for a review of specific conditions, including those governing Time-of-Day (TOD) slots for solar power and significant increases in capital expenditure (CAPEX) amounting to over Rs 55,000 crores. Without notifying or hearing the stakeholders—including solar power generators and consumer groups—the MERC passed a review order in June 2025 that fundamentally altered the financial and operational landscape for these parties.

The Legal Tug-of-War

The petitioners argued that the MERC’s review order was passed in blatant disregard of the principles of natural justice and statutory mandates, specifically referencing the Transaction of Business (TOB) Regulations, 2022 . They contended that if the original tariff was determined through public scrutiny, any subsequent modification substantively altering those terms must undergo the same rigorous process.

Conversely, the respondents (MERC and MSEDCL) defended the impugned order by characterizing tariff determination as a "regulatory" rather than "adjudicatory" function. They argued that the Commission possessed inherent powers to correct errors and that consultation was not a mandatory prerequisite for every review, suggesting the petitioners should have approached the Appellate Tribunal (APTEL) instead of the High Court.

Court’s Analysis: Transparency as a Statutory Mandate

The Bombay High Court decisively rejected the respondents' stance, emphasizing that the Electricity Act, 2003, places high value on consumer interest and transparency (Section 86(3)). Drawing on the Supreme Court’s precedent in Gujarat Urja Vikas Nigam Limited vs. Solar Semiconductor Power Company (India) Private Limited , the Court held:

> "The generic tariff once determined under the statute with notice to the public can be amended only by following the same procedure. Therefore, the approach of this Court ought to be cautious and guarded when the decision has its bearing on the consumers."

The judges noted that Regulation 40(b) of the TOB Regulations explicitly requires that if the Commission seeks to make amendments to determine the "real question or issue," it must provide an opportunity to affected parties to make representations. The MERC's ex-parte approach was determined to be a "wholly unsustainable" bypass of this mandate.

Key Observations

The judgment captures the essence of the procedural requirements that regulators must uphold:

• On Transparency: "It would be absurd to suggest that those very stakeholders, whose objections and suggestions were invited and considered, are not to be heard when the same MYT order is sought to be amended/reviewed, and that too to their detriment."
• On Inherent Powers: "When the Electricity Act, 2003 and the Regulations... provide for certain matters, there is no question of the Commission invoking any inherent power to deviate therefrom. The inherent powers cannot be invoked to bypass the Act or Regulations."
• On the Nature of the Order: "The impugned review order by no stretch of the imagination could be termed as one which was passed for correcting any clerical or arithmetical mistake."

The Road Ahead

The High Court has remanded the matter back to the MERC, mandating that the commission must now allow stakeholders to view the review petitions and submit their objections before a fresh order is passed. The original MYT order of March 28, 2025, remains in effect until the new order is finalized. By mandating a return to consultative roots, the court has ensured that India’s green energy transition remains grounded in fair play and legal rigor, protecting both the industry and the end-consumer from arbitrary regulatory shifts.