Ogra disallows major hike in gas tariff
ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) has rejected petroleum ministry’s demand to increase gas tariff by about Rs10 per unit and treat as sales the Rs11 billion theft, pilferage and non-recovery for un-metered supply.
The decision has been sent to the government for notification by Ogra which determines the ‘final revenue requirement’ of the Sui Northern Gas Pipelines (SNGPL) and Sui Southern Gas Company (SSGCL) for 2011-12.
The determination has been pending for over six months owing to a dispute among various stakeholders, resulting in non-compliance by the gas utilities with statutory requirements of the Securities and Exchange Commission (SECP) that require all listed companies to announce their annual accounts by Sept 30 every year.
An Ogra official said the determination had been sent to the government on Feb 1. “The honest and paying consumers have been protected from an unfair tariff increase,” he said.
The decision has not gone well with the ministry of petroleum and natural resources which was seeking a binding directive from the federal cabinet to allow the losses caused by gas theft, pilferage and un-quantified leakage to be recovered from consumers over and above the seven per cent unaccounted for gas (UFG) losses already being passed on to them.
A ministry official said the Prime Minister’s Adviser on Petroleum and Natural Resources Dr Asim Hussain had issued instructions to prepare a complaint against the regulator for issuing the final determination while the matter was still under consideration of the cabinet.
An Ogra official, however, said a previous decision of the cabinet required the ministry to fix benchmarks in consultation with the regulator, explaining why the paying consumers should be burdened with additional losses of the companies. They were already paying for seven per cent UFG losses although the efficiency standards allowed 4.5 per cent losses.
A few meetings held on the subject had remained non-productive.
In its determination for the SSGCL, Ogra disallowed passing on the impact of 2,059 million cubic feet (MMCF) of pilfered gas, 1,286MMCF of unbilled consumption in parts of Sindh and Balochistan facing law and order problems and 3,987MMCF on account of minimum billing.
The combined impact of the rejection has been worked out by Ogra at Rs4.5bn.
The authority determined SSGCL’s final revenue requirement for 2011-12 at Rs134bn against Rs138.5bn claimed by the company.
Ogra worked out the company’s UFG losses at 10.8 per cent and allowed seven per cent to be recovered from consumers.
The determination for the SNGPL rejected the proposal to pass on Rs6.3bn to consumers. The SNGPL had demanded 7,541MMCF of un-measured gas, 11,172MMCF of pilferage by non-consumers and 3,377MMCF as unbilled volume to be included in the tariff because the recovery was not possible because of the law and order situation.
Ogra determined 2,136MMCF loss due to law and order and 6,607MMCF as gas pilferage detected by the company.
It worked out SNGPL’s final requirement for 2011-12 at Rs220.6bn against the demand for Rs226.9bn.
The regulator said the companies had been repeatedly asked to make concerted efforts to curtail their increasing expenditure in order not to pass on this avoidable cost to consumers.
The companies also spent significant amounts on outsourcing bill recovery and litigation against defaulters. A commensurate outcome, however, has not been observed.
“This status quo strengthens the authority’s findings that petitioners had not made concerted efforts to control this cost and fundamental flaws exist in management policies and recovery mechanism resulting in inefficiencies in various areas, particularly on this account.
“This cost of management inefficiencies, therefore, should not be passed on to consumers,” Ogra said.