October 02, 2007	Tuesday	Ramazan 19, 1428

ISLAMABAD, Oct 1: The Oil and Gas Regulatory Authority (Ogra) has reduced the prescribed prices of the Sui Southern Gas Company Ltd (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL) by Rs8.39 and Rs0.44 per unit, respectively, but the government will take its windfall rather than the consumers.

The government will earn more than Rs1.92 billion in gas development surcharge (GDS) on account of revision in audited accounts of the two gas utilities for the financial year ending on June 30, 2007.

While re-examining the annual accounts and final revenue requirements of the two utilities, Ogra reached the conclusion that prescribed prices of different consumer categories allowed earlier were on the higher side and required readjustment on the basis of final audited accounts.

As a result, Ogra reduced prescribed prices for SSGCL consumers by Rs8.39 per MMBTU (a gas unit defined as million British thermal unit) and by Rs0.44 per unit for SNGPL consumers. This provided savings of about Rs1.485 billion and Rs436 million to the government on account of the SSGCL and SNGPL, respectively.

The savings would, however, would not be passed on to the consumers for the fact that they had already paid their bills for 2006-07 in accordance with the old prescribed prices.

The relevant Ogra rules allow the government to retain the difference between prescribed prices and consumer prices if at the time of finalisation of accounts the prescribed prices turn out to be lower than consumer sale prices.

The saving so achieved at the end becomes part of the gas development surcharge.

SSGCL: In its determination, Ogra noted that the item-wise examination of accounts suggest that SSGCL’s final revenue requirement for 2006-07 was Rs72.606 billion as against its claim of Rs74.091 billion that the company had in fact collected from the consumers.

Therefore, Ogra disallowed Rs1.485 billion of revenue to the SSGCL, which would now stand transferred to the national treasury.

The SSGCL had demanded an increase of about Rs1.36 per MMBTU in its prescribed price but Ogra reduced its tariff by an average Rs8.39 per unit, instead of the requested increase.

Ogra found out that SSGCL’s claim on almost all items, including on account of cost of gas, system losses, transmission and distribution cost, depreciation and return on assets were all on the higher side, but the biggest saving of about Rs1.154 billion came on account of SSGCL’s failure to meet system losses to the extent of target set by Ogra.

SSGCL’s system losses stood at 7.06 per cent against a target of six per cent.

SNGPL: Ogra concluded that SNGPL’s final revenue requirement for 2006-07 was Rs114.9 billion as against its claim of Rs115.35 billion that it had in fact already collected.

Therefore, Ogra disallowed Rs436 million of revenue to the SNGPL. As a result, the average prescribed price for SNGPL consumers was reduced by 44 paisa per unit compared with an increase of Rs1.24 per unit sought by the company.

Ogra concluded that the final revenue requirement as determined by it “would affect the prescribed prices for the said year, impacting, in turn the gas development surcharge receivable by the government and not the consumer”.