Ogra allows Rs13.4 rate increase to SNGPL

Published February 11, 2021
The increase was determined on the request of gas utility on the basis of its estimated revenue requirement (ERR) for 2020-21. — Reuters/File
The increase was determined on the request of gas utility on the basis of its estimated revenue requirement (ERR) for 2020-21. — Reuters/File

ISLAMABAD: Rejecting a re­­quest for 123 per cent increase, the Oil & Gas Regulatory Authority (Ogra) on Wednesday allowed Rs13.42 per unit (2pc) raise in the prescribed price for Lahore-based Sui Northern Gas Pipelines Ltd (SNGPL).

The increase was determined on the request of gas utility on the basis of its estimated revenue requirement (ERR) for 2020-21. The regulator said it provisionally determined the shortfall in revenue required for the SNGPL at Rs4.35bn. “Accordingly, the revenue required for SNGPL is provisionally determined at Rs228.7bn and prescribed at Rs644 per million British thermal unit (mmBtu) against each category of consumers for the said year.”

It said the company had demanded an increase of Rs773.5 per unit, or 123pc, to Rs1,404 per mmBtu but the regulator did not allow the company’s previous year’s shortfall of Rs197bn and referred the matter to the federal government for a policy decision.

Rejects demand for an increase of Rs773.5 per mmBtu

The authority has also allowed the gas utility to double its gas meter rent from Rs20 per month to Rs40 per month from domestic consumers. In its determination, Ogra recommended to the government to fix Rs645 per unit rate for all consumer categories so that all consumers pay at least the cost of gas supply. It decided to adjust the prescribed price in the remaining period ‘since sales prices cannot be revised retroactively’.

However, Ogra put on record that the government had allowed insufficient revisions to its determined sale rates and resultantly the SNGPL remained unable to meet the shortfall determined by Ogra.

“Accordingly, the backlog is persistently piling up. Ogra, considering the government stance in respect of sale price revisions, had not included any financial impact relating to previous years’ shortfall” as part of this determination.

Regarding inclusion of previous year shortfalls (Rs197bn), Ogra “through this order refers the matter to the federal government for adequate revisions it deems appropriate” but warned that cushion available at the time for adjustments of past shortfalls was no more available now owing to increase in international oil prices, exchange rate and sales volume mix based on actual volumes for July-August 2020.

It asked the government to advise natural gas sale price, after inclusion of previous year shortfalls so that company is able to meet its revenue gaps. “In case the federal government decides not to burden the consumers, it may please alternatively consider payment of subsidy to the company to meet its previous years’ shortfalls”.

Under the law, the government has the right to set within 40 days different rates for various consumers within the overall revenue requirement approved by the regulator.

The regulator said that if federal government failed get back to it with its advice within 40 days and the prescribed price for any category of retail consumers determined by the authority is higher than the most recently notified sale price for that category of retail consumers, the authority shall be obligated to notify in the official gazette the prescribed price as determined by the authority to be the sale price for the said category.

The regulator suggested that the petitioner should focus and make concerted efforts on reduction of unaccounted for gas (UFG) losses, improvement of internal control systems, increase of efficiency, quality of service, emergency response plan, and effective cost control, reduction measures should be taken to remain financially viable instead of making all out efforts to seek passing on of costs associated with its own inefficiencies, malpractices, thefts, bad debts and alike to the consumers.

Last month, Ogra had allowed Rs44 per unit (5.4pc) increase in the prescribed price for SSGC. The government has to advise the regulator a natural gas sale price at a uniform rate for both companies.

Published in Dawn, February 11th, 2021

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