ISLAMABAD: Taking a principled stance, the Oil & Gas Regulatory Authority (Ogra) has declined to attend meetings of the Ministry of Energy on sub judice regulatory matters.

A senior official at the Petroleum Division of the Ministry of Energy told Dawn that the regulator had taken a written position that it was not available for meetings on statutory regulatory matters. “Ogra [the regulator] is constrained to recuse itself from attending any such meetings,” the official quoted an Ogra communication as saying.

Informed sources in Ogra said the regulator had been receiving repeated letters almost on a daily basis from the petroleum and power divisions of the energy ministry on the issue of its determination of the gas companies’ revenue requirements for 2021 that had not gone well with the gas companies and the Petroleum Division.

In its letter to the Director-General Gas of the Petro­leum Division, the regulator explained that it was en­­trusted with statutory functions under Ogra Ordinance and was mandated to act in a transparent, non-discriminate and equitable manner. The regulator has to adjudicate upon the matters that are brought before it by the relevant licensees, gas companies in this case.

Says it is mandated to act in a transparent, non-discriminate and equitable manner

“In case any licensee is aggrieved by any of Ogra’s decision, it may appeal and then file a review” before the regulator in accordance with the requirements of the Ogra ordinance and the courts of competent jurisdictions if at all. It said that since sufficient remedy was available to address licensee’s concerns, “questioning Ogra’s decision in executive meetings is not desirable”.

Independent regulators

A petroleum ministry official said Ogra and National Electric Power Regulatory Authority (Nepra) were independent under their relevant laws but there was no harm in attending meetings with the petroleum and power divisions. He agreed that the government could pass on policy guidelines to the regulators with prior approval of the federal cabinet.

It may be recalled that in November last year, the regulator reduced the cost of system losses charged to consumers from about 13-17pc to about 6.3pc on account of pricing of regasified-liquefied natural gas through a majority decision.

In doing so, Ogra also notified the RLNG price for four months — August to November 2020 — that had been withheld due to lack of Ogra quorum and disagreement among two remaining members. The decision is estimated to have provided about $85m (about Rs14bn) savings to RLNG consumers over these four months.

As such, the unaccounted for gas (UFG) loss allowance in tariff for Sui Northern Gas Pipelines Ltd reduced by about 5pc while that of Sui Southern Gas Company Ltd (SSGCL) by about 10pc.

RLNG price audit

By majority, Ogra also decided to appoint through competitive bidding an international auditor to conduct technical, commercial and management audit of the RLNG pricing including data provided by the companies in the LNG supply chain for the last 4-5 years. Based on such audit, adjustments would be made in case it was found that excess payments had been allowed to gas companies in past pricing, Ogra had announced.

The controversy emerged after Member Gas Muham­­mad Arif pointed out a discrepancy in RLNG tariff and advocated that UFG loss for 2020-21 for SSGCL should be taken as 6.42pc (including 0.12pc of transmission loss). Likewise, UFG for SNGPL should be taken at 6.68pc (0.38pc) on provisional basis.

Loss determination

On the other hand, Mem­ber Finance Noorul Haque, based on past practices, had been insisting on allowing the cost benefit of about 11pc RLNG loss to SNGPL and 8.73pc to SSGCL.

The ECC decision of June 2016 provided for “distribution loss to be determined and charged at actual. The said loss for the customers located on high pressure transmission lines as well as those customers who are willing to lay their dedicated line shall also be determined and charged as actual. However, for other customers on distribution lines, an actual average UFG for the last financial year will be taken in the determination.” The ECC decision had also held that transmission loss to be charged at actual subject to a maximum of 0.5pc.

During proceedings for determination of final revenue requirement (FRR) of SNGPL for the year 2018-19, “it transpired that no effective and objective determination was undertaken by Ogra relating to distribution loss” and whatever had been claimed by SNGPL, had been proposed by the Ogra’s Gas Department and taken as “determination of authority”.

Published in Dawn, February 23rd, 2021