Ratnagiri Gas & Power (ex-Dabhol) cannot be denied capacity charges by MSEDCL

In a significant decision going into the root of the rehabilitation of Ratnagiri Gas and Power Pvt Ltd (earlier Dabhol Power), the Hon’ble Supreme Court in a Judgment dated 09.11.2023 has held that MSEDCL is liable to pay the capacity charges based on Declared Capacity of the generator using RLNG as a fuel. It has been held that the clauses in Power Purchase Agreement (PPA) have to be interpreted with the original purpose and intendment of the parties to the document. Implied Terms contrary to the contractual provisions cannot be read into a PPA.

The Maharashtra Distribution Company had denied its liability to pay the fixed charges / capacity charges to the Generating Company – Ratnagiri Gas & Power Pvt Ltd on the basis that its approval had not been obtained before a Gas Supply Contract was entered into by the Generating Company. Even though the PPA provides for the tariff to be paid in two parts – capacity charges towards Declared Capacity and Energy Charges towards Energy Scheduled, the payment of Capacity Charges was withheld.

The Supreme Court has confirmed the Orders passed by the lower authorities, namely the CERC and the APTEL and held that the payment of Capacity Charges only depends on the Declaration of Capacity i.e. capability of the generating station to deliver electricity. It has also held that both Gas and RLNG had been contemplated by the parties as primary fuel and as long as the Generating Station had contracts for supply of Gas / RLNG, it is entitled to declare availability and receive Capacity Charges.

Ratnagiri Gas & Power Pvt Ltd was represented by MSA Partners and a copy of the Order can be accessed here.