ISLAMABAD: The determination for Final Revenue Requirements (FRR) of two gas utilities SNGPL and SSGCL for 2011-12 has been delayed beyond a legal deadline owing to inability of the government and Ogra to fix a cap on allowance for gas theft, loss in security hit regions and minimum monthly charges.
An Oil and Gas Regulatory Authority Ogra official told Dawn on Monday that the regulator was required to finalise the FRR by end of September 2012. As a consequence, the legal requirement to declare final accounts of the two gas utilities has been delayed by almost two months now.
The two gas utilities informed the capital market regulators the Securities and Exchange Commission of Pakistan and the Karachi Stock Exchange that they could not finalise their annual accounts because of delays by the Ogra to determine their FRR.
The gas utilities were granted one-month relaxation by the corporate watchdogs to submit their annual results. Now a fresh request has been sent to the KSE for second extension for another month.
As a consequence, the Ogra has not been able to take up for public hearing the requests by the two gas utilities to determine half-yearly revenue requirements and prescribed prices for the current year within the legal time period fixed under the Ogra law.
The Ogra law requires the regulator to hold public hearing and determine prescribed gas prices and forward its determination latest by November 20 for the first half and by May 20 for second half of the year.
The law also requires the federal government to take a decision on Ogra-determined prescribed prices within 40 days and fix consumer-end gas prices with effect January 1 and July 1 every year.
Informed source said the requests by the two utilities for increase in gas tariff and additional revenue requirement for the current year have been pending before the Ogra for quite sometime but the regulator has not taken up these for hearing.
An Ogra official said the regulator was making efforts to hold public hearing for the interim revenue requirement of the two gas companies for first half of the current year in the last week of this month and hence the legal requirement to forward its half-yearly determinations by November 20 would be missed.
These sources said the major obstacle in finalising FRR for last fiscal year (2011-12) and interim revenue requirement for half-year (2012-13) was inability of the petroleum ministry and the Ogra to agree on benchmarks for unaccounted for gas, gas thefts, losses in law and order prone areas and minimum monthly charges because of their nervousness to decide on crucial issues when the Supreme Court of Pakistan was closely monitoring gas pricing issues.
The apex court is currently seized with over Rs83 billion worth of cases relating to former Ogra Chairman Tauqir Sadiq that also involved CNG pricing and increase in UFG allowances to gas utilities.
This is despite the fact the federal cabinet has already allowed certain losses arising out of gas theft by non-consumers and non-recovery of gas bills and system losses in areas hit by adverse security situation. While allowing these losses worth Rs10 billion a year to be recovered from honest gas consumers, the cabinet had directed the petroleum ministry and the Ogra to fix a reasonable cap on such allowances.
An official said that despite circulation of minutes of the cabinet meeting, the petroleum ministry had now yet advised the regulator about the benchmarks or invited the regulator for consultation on the matter.
“The petroleum ministry and Ogra are pre-occupied with CNG pricing cases being heard by the Supreme Court and have not been able to discuss larger issues of public interest”, said a senior official at Ogra.
He said the regulator was also worried over some of the allowances regarding gas losses in security hit regions it allowed to the gas companies last year and feared that these could be opened for hearing by the apex court because these may have weak legal standing.
For example, no law could allow the cost of gas theft determined by the gas utilities to be passed on to honest consumers, even though some justification could be contested on account of security related losses.