Recently, in a landmark challenge against the Maharashtra Electricity Regulatory Commission’s sweeping modifications to a Multi-Year Tariff framework, the Bombay High Court scrutinises the boundaries of regulatory review powers. At the heart of the dispute, whether MERC could unilaterally alter banking provisions, tariff categories, and capital expenditure norms without fresh public notice or stakeholder hearings, invoking “inherent powers” to bypass statutory safeguards. Read on to discover how the Court upheld procedural sanctity in electricity regulation.
Brief Facts:
The case arose when several power sector entities and consumer groups approached the High Court challenging the Review Order issued by the Maharashtra Electricity Regulatory Commission (MERC). The dispute stemmed from MERC substantially modifying key components of the earlier Multi-Year Tariff (MYT) Order without issuing a fresh public notice or granting an opportunity of hearing to affected stakeholders. The Petitioners contended that changes in banking provisions, tariff categorisation for hotels, working capital norms, and capital expenditure approvals were introduced in the review order, even though these issues had already been adjudicated in the original MYT proceedings. The controversy deepened when MERC passed the review order in the absence of several stakeholders, prompting concerns about transparency, procedural fairness, and compliance with the statutory framework under the Electricity Act, MYT Regulations, and Conduct of Business Regulations.
Contentions of the Petitioners:
The Petitioners submitted that MERC had gone beyond the scope of review and used its “inherent powers” to modify tariff parameters that had already achieved finality. They argued that the review order fundamentally altered tariff classifications, banking timelines, technical parameters, and CAPEX approvals, issues that required fresh notice and consultation under the MYT Regulations. It was further contended that MERC failed to issue any public notice or invite objections prior to passing an order of such magnitude, violating principles of natural justice and transparency expected of a regulatory body. The petitioners emphasised that stakeholders were effectively denied a hearing, causing prejudice in matters directly affecting tariff and operational norms.
Contentions of the Respondents:
On the other hand, MERC defended its decision by stating that the review order was issued to remove errors arising out of the record and to clarify inconsistencies. It asserted that inherent powers permitted it to correct such errors without mandatorily issuing fresh public notices. MERC maintained that the review order did not fundamentally alter the original MYT determinations but merely addressed aspects that required limited reconsideration. The Respondents supporting MERC further argued that no prejudice was caused and that the modifications were within the permissible regulatory framework.
Observations of the Court:
The Court emphasized that the review order brought significant modifications to the original Multi-Year Tariff (MYT) order issued in March 2025, impacting stakeholders, particularly solar energy companies and consumers, without affording them an opportunity to be heard.
The Court noted, "One can hardly dispute that this is a significant change from the original MYT order and affects all solar generating companies and their customers." Similarly, the Court highlighted the ex-parte alteration of hotel tariff categorization, stating, "in the ex-parte impugned review order, the categorization of the hotels and lodging facilities was changed from HT-I to HT-II (i.e. HT-Commercial Category). In other words, hotels and lodging facilities, under the impugned review order, were now to pay a much higher tariff than what was determined in the original MYT order dated 28th March 2025. This again was done without hearing anyone, other than MSEDCL."
Examining the statutory framework, the Court relied on the MYT Regulations, 2024 and the TOB Regulations, 2022, emphasising that these prescribe mandatory procedural safeguards. As per Regulation 14 of the MYT Regulations, 2024, " The Petitioner shall, within three days of an intimation given to it in accordance with Regulation 14.4, publish a Public Notice in at least two English and two Marathi language daily newspapers widely circulated in the area to which the Petition pertains, outlining the proposed Tariff, and such other matters as may be stipulated by the Commission, and inviting suggestions and objections from the public." The Court emphasized that this procedure ensures transparency and stakeholder participation, which was followed in the original MYT order but disregarded in the review order.
Regarding the scope of MERC’s inherent powers, the Court clarified that such powers cannot be invoked to bypass the statutory process. Referring the TOB Regulations, 2022, the Court stated, "When the Electricity Act, 2003 and the Regulations (the MYT Regulations, 2024 and/or the TOB Regulations, 2022) provide for certain matters, there is no question of the Commission invoking any inherent power to deviate therefrom." It further elaborated that Regulations 28, 39, and 40 collectively require notice to affected parties for any review or amendment affecting them, "if any review/amendment is to be made to a MYT order, notice to the affected parties has to be issued allowing them to make their submissions and/or representations to the proposed amendments/rectifications."
The Court also referred to the Supreme Court decision in Gujarat Urja Vikas Nigam Limited vs. Solar Semiconductor Power Company (India) Private Limited & Anr, noting,
"The only leeway available to the Commission is only when the Regulations on proceedings are silent on a specific issue. In other words, in case a specific subject or exercise of power by the Commission on a specific issue is otherwise provided under the Act or the Rules, the same has to be exercised by the Commission only taking recourse to that power and in no other manner."
The Court concluded that MERC, being a creature of statute, cannot assume powers not conferred upon it and must follow the prescribed statutory procedure. It emphasized, "The Commission being a creature of statute cannot assume to itself any powers which are not otherwise conferred on it. In other words, under the guise of exercising its inherent power as we have already noticed above the Commission cannot take recourse to exercise of a power, procedure for which is otherwise specifically provided under the Act."
The decision of the Court:
In light of the above findings, the Court set aside the MERC Review Order, holding that it was passed in complete violation of natural justice and the statutory scheme under the Electricity Act and MYT Regulations. The Court concluded that MERC could not modify substantial tariff components without issuing a fresh public notice, without inviting objections, and without hearing affected parties.
Accordingly, the writ petitions were allowed to the extent indicated, and the Review Order was quashed for having been issued without due process.
Case Title: O2 Renewable Energy VII Private Limited Vs. Maharashtra Electricity Regulatory Commission
Case No: Writ Petition (L) No.19437 Of 2025
Coram: Hon’ble Justice Firdosh P. Pooniwalla, Hon’ble Justice B. P. Colabawalla
Advocate for Petitioner: Sr. Adv. Zal Andhyarujina, Advs. Shruti Sardesai, Shrey Shah, Shreya Mukherjee, Sai Archit M.
Advocate for Respondent: AG Birendra Saraf, Sr. Advs. J.P. Sen, Sajan Poovayya, Advs. Ratnakar Singh, Vishal Binod, Sagnik Maitra
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