Dismissing the Maharashtra State Electricity Distribution Company’s (MSEDCL) petition to waive its dues to Ratnagiri Gas and Power (RGPPL), the Appellate Tribunal for Electricity (Aptel) has ruled that the discom must pay the generator fixed charges. MSEDCL owes RGPPL, which operates a power plant in Dabhol, around R2,300 crore as fixed or capacity charges accrued in financial years 2012-13 and 2013-14, according to a senior RGPPL official.
“(MSEDCL) cannot refuse to pay the fixed charges … even when the existence of (RGPPL) is already under threat”, the bench in its 42-page judgment.
RGPPL’s net debt stands at R8,500 crore and under pressure from lenders, it converted R405 crore of debt into equity on January 1 and plans to convert another tranche of R450 crore — which would reduce its debt by R855 crore.
RGPPL and MSEDCL had entered into a power purchase agreement in April 2007 by which the former was to supply 95% of its generated power to the state-owned distribution company.
According to MSEDCL, the terms of the PPA showed it was legally bound to purchase only that power produced using domestic gas or LNG. However, due to a decline in the supply from the Krishna-Godavari Basin, RGPPL was forced to use imported gas, processed at its gas terminal to re-gasified liquefied natural gas (RLNG).
In FY13 and FY14, RGPPL asked MSEDCL to provide a schedule to supply power. However, MSEDCL refused to purchase power, saying the increased tariff would overburden customers.
The PPA also stated that the power purchaser had to pay certain capacity charges incurred by the generator regardless of whether power is produced or sold. MSEDCL contested the payment of the charges on the grounds that RGPPL had flouted the terms by using RLNG as fuel and hence it was not legally required to pay the charges.
The two-member Aptel bench observed that obligation to pay the capacity charges throughout the term of the PPA exist independent of whether MSEDCL chooses to schedule electricity or not so long as (RGPPL) is in a position to operate the generating station. They added there were several instances where capacity charges have been paid by the purchaser of electricity to the generating companies without the benefit of electricity being generated.
“(RGPPL) cannot be denied the capacity charges on account of the fact that the appellant chose not to schedule electricity considering the price of fuel to be high,” the judgement read. The bench also noted that RGPPL is highly indebted and “in such situation the appellant cannot deviate from its responsibility by taking up frivolous ground”. An MSEDCL spokesperson said the company plans to appeal against the judgment in the apex court.