KARACHI, April 25: Amid mounting opposition to the Sui Southern Gas Company’s demand for a price increase, the utility is being asked to explain reasons for very high percentage of expenses for the unaccounted-for gas (UFG) which, experts believe, could have been used for generating about 600 megawatts of electricity.

According to sources, the UFG had surged to 10.5 per cent in February, which was in sharp contrast to the benchmark set by Ogra. In the United States and Europe, UFG is about one per cent per annum.

Many members of the ruling coalition are concerned at the rising cost and shortage of energy sources in the country and support the idea that the utility should be asked to drastically cut UFG and line losses instead of demanding a 17 per cent increase, which will be passed on to consumers. They said they could not understand how a company purchasing gas at the wellhead and distributing it through a pipeline to its clients could have such a huge expense for UFG.

Parliament’s committee on the power and energy sector is also expected to take up the issue soon so that frequent increases in cost are checked and officials are held accountable for the questionable expenses in the name of infrastructure development. Sources said that this committee might look into some of the cases of alleged corruption in the utility during the tenure of the previous dispensation.

Experts said that if UFG was controlled, the utility would not have the need for increasing the tariff. The federal government is also being asked to look into the matter. They also demanded an investigation into infrastructure development expenditure of the company.

While UFG remains uncontrolled, it is surprising that the SSGCL has burdened its consumers with inflated bills and increased tariff and is not prepared to share the burden of its mistake from its profit.

Major stakeholders maintain that if due to the negligence and inefficiency of the SSGCL a big portion of the gas has remained unaccounted for, the burden should not be passed onto the consumer and the utility must be held accountable for it.

The SSGCL in its petition to Ogra has projected a shortfall in the revenue requirement for 2008-09 at Rs26,625 million, seeking an increase of Rs69.37 per MMBTU from July 1 in its average prescribed price. But in the footnote of one of the annexed documents of the petition, the SSGC maintained that the upward adjustment of Rs69.37 per MMBTU for 2008-09 had been reworked to Rs90.05 per MMBTU with the consideration that the effect of price increase would not pass on to domestic customers and feedstock of the fertilizer industry.

The main reason for the increase in the prescribed price as explained by the petitioner is the projected increase in the cost of gas, which the petitioner is required to pay to the gas producers.

The cost of gas is linked to the international price of crude oil in accordance with the agreements between the Federal Government and the gas producers. Ogra is expected to give its verdict on the SSGCL petition next month.

In its decision of Sept 14, 2007, Ogra had fixed the UFG upper and lower targets at 6 per cent and 5.40 per cent , respectively, for 2005-06 , with the conditions that the petitioner would be entitled to retaining the savings in the event of actual performance being better than the lower target, fully bear UFG above the upper target from its own profits and UFG between the lower and upper target be adjusted in the revenue requirement to the extent of 50 per cent and the balance 50 per cent be absorbed by the utility from its own profits.

But the SSGC had contended that the UFG targets set by Ogra were “unrealistic and not achievable due to the prevailing theft culture, delay in rehabilitation of old network due to the exorbitant road restoration charges and encroachments on the network”. It had maintained that due to the above-mentioned reasons it could only achieve the UFG level of 7.06 per cent for the year. But Ogra had maintained its earlier benchmark. This time around also the SSGCL has advanced similar arguments in this regard for seeking a 17 per cent increase in tariff.

Although the SSGCL had previously held the “prevailing theft culture” responsible for UFG, it had not mentioned how it was being done and with whose connivance and to what extent its procurement policy was responsible for the problem.

Insiders said the procurement of unspecified material of the distribution system, such as service valve, regulators, pipes and fittings and other accessories were some of the causes of UFG. They said that over 100,000 service regulators, 32,000 service valves and 25,000 commercial regulators and pipes and fittings made of unspecified, allegedly substandard, material were approved on behalf of the higher management of transmission and distribution.

The SSGCL’s board of directors is also expected to meet next week.