Summary
The Supreme Court held that “natural gas only” in the parties’ amended power-purchase agreement excluded RLNG, despite its being a form of natural gas. The contractual history, cost-sensitive purpose, correspondence and parties’ understanding showed an intention to use domestically available natural gas in its natural form. Exceptional short-term permission to use RLNG did not establish inclusion or waiver. The Court restored the Electricity Regulatory Commission’s order.
Issues
- Whether the PPA’s definition of fuel included RLNG.
- How contractual history, commercial context and the parties’ dealings affected interpretation.
- Whether exceptional permissions or the statutory natural-gas definition altered the result.
Held
- The agreement’s amendments successively replaced costly Naphtha as primary fuel and confined fuel to natural gas only. RLNG was not discussed when the amendments were approved; importation, additional processing and higher costs reinforced the conclusion that the parties had not intended its inclusion. (¶¶ 4, 16, 17, 18, 19)
- The question was the intended contractual scope, not merely the scientific relationship between RLNG and natural gas. The document had to be read as a whole in its commercial context, with the consumer-price objective and surrounding circumstances informing the parties’ intention. (¶¶ 18, 19, 20, 23, 27)
- The generator’s letters and pleadings sought permission for RLNG and acknowledged rejection of that request. They supported the shared understanding that the existing PPA did not authorize its use. (¶¶ 21, 24)
- Sporadic permission during pressing power shortages, pursuant to special orders for short periods, did not make the exception the contractual norm. Neither waiver nor approbation and reprobation arose on these facts. (¶ 22)
- Business efficacy did not permit adding a term inconsistent with the parties’ intended bargain where the agreement made commercial sense without it. The PNGRB Act definition and a constitutional legislative-entry decision served different purposes and did not determine interpretation of this PPA. (¶¶ 25, 26)
Result
Appeal allowed. Appellate Tribunal judgment reversed and Commission’s order of 8 August 2013 excluding RLNG from the PPA fuel definition affirmed.