APTEL Quashes MERC’s BESS Tariff Order, Cancels MSEDCL’s 2000 MW/4000 MWh Battery Storage Tender

The Appellate Tribunal for Electricity (APTEL) has overturned an order issued by the Maharashtra Electricity Regulatory Commission (MERC) regarding the procurement of power from a 2000 MW/4000 MWh Battery Energy Storage System (BESS) project. Along with setting aside the tariff approval, APTEL also cancelled the entire competitive bidding process and directed the Maharashtra State Electricity Distribution Company Limited (MSEDCL) to return all bank guarantees and security deposits submitted by participating bidders within four weeks.

The dispute relates to a tender issued by MSEDCL in July 2025 under the Government of India’s Viability Gap Funding (VGF) scheme. The scheme provides financial support of up to ₹18 lakh per MWh from the Power System Development Fund to encourage large-scale battery energy storage projects.

The tender was originally designed around a two-cycle-per-day battery operation. However, before bids were submitted, MSEDCL issued an addendum changing the project design to a single-cycle-per-day operation. Based on this revised specification, several developers, including Diwakar Renewable & Infra, OPG Power Generation, Onward Solar Power, Mahati Industries, and Bhilwara Energy, prepared and submitted their technical and financial bids.

Under the revised design, the battery system was expected to complete approximately 5,475 operational cycles over the 15-year contract period. The issue emerged later in December 2025, after the bids had already been opened and the lowest tariff of ₹1,65,998 per MW per month had been identified.

At that stage, the Ministry of Power granted conditional approval to MSEDCL’s proposal for a single-cycle project. However, the approval came with an important condition. MSEDCL was required to retain the contractual right to use the battery system for at least 6,300 cycles during the contract period without any additional payment.

The developers strongly opposed this requirement before MERC. They argued that increasing the cycle requirement from the originally understood level to 6,300 cycles would result in significant additional costs. According to the developers, they would need to invest more capital to manage battery degradation and maintain performance. They also expressed concerns that failure to meet the higher cycle requirement could affect their eligibility for VGF support or even force them to repay the funding received.

Despite these objections, MERC approved the tariff, accepting MSEDCL’s argument that the 6,300-cycle provision was only a contractual right and not a mandatory operational obligation.

APTEL, however, disagreed with this interpretation. The tribunal observed that the Ministry of Power’s approval was conditional and would require MSEDCL to include the 6,300-cycle clause in the final agreements. Once included, MSEDCL would have the legal authority to exercise that right, creating a significant burden on developers that was not reflected in the original bidding conditions.

The tribunal concluded that introducing such a major technical change after financial bids had been finalized violated the fairness and integrity of the competitive bidding process. Comparing the situation to changing the rules after a game has already started, APTEL held that the post-bid modification undermined the sanctity of the tender process. As a result, it set aside MERC’s tariff order, cancelled the contract awards, and protected developers from potential financial losses arising from the revised conditions.