Ogra seeks guidelines for charging consumers

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ISLAMABAD: The Oil and Gas Regulatory Authority has sought well-defined policy guidelines from the government for charging consumers for its expenditure. The policy guidelines should also lift a ban on new development schemes which the authority said was put in place in October last year, so that the expenditure incurred by gas companies in excess of allowed quota could be charged to consumers, a senior Ogra official told Dawn.

Ogra has also asked the government to introduce a new gas pricing mechanism which provided market-based returns to gas utilities for moving away from existing practice of allowing gas companies a guaranteed return on assets ranging between 17 and 17.5 per cent.

Ogra noted that “the country is facing an unprecedented shortfall in demand and supply of gas owing to which gas is being curtailed to the power, fertiliser and industrial sectors especially during winter season and pressure drop issue is also increasing”. This cut to important sectors, which steer economic growth, has a negative impact on the overall trade and industry of the country.

The regulator noted that the prime minister’s adviser on petroleum and natural resources was insisting on allowing new development schemes in the revenue requirements of gas companies, probably to accommodate demands of ruling politicians ahead of elections, but unless a moratorium on new development schemes was lifted by the government, Ogra was legally constrained to disallow such expenses to be charged to consumers.

Therefore, the Ogra has asked the government to lift the moratorium of Oct 2011 on new gas schemes and issue clear policy guidelines.

Ogra has allowed Rs5.6 billion expenditure to Sui Northern Gas Pipelines Limited on provisional basis for distribution development subject to actualisation on the basis of guidelines to be issued by the government. Under the existing arrangements, the expenditure permitted by Ogra to SNGPL covered the cost of 165,000 connections a year, against their demand of 253,400 connections.

There are about one million pending gas connection applications and the number is expected to touch 1.5 million by end of this year. The gas company has sought to increase the annual connection limit to 400,000 for the current year, saying the delay in provision of gas connection was causing increase of gas theft trend by non-consumers.

Currently, the SNGPL and SSGCL are allowed 17.5 and 17 per cent guaranteed return on average net fixed assets, which most of the consumer groups contended were leading to higher inefficiency by gas companies.

Ogra has, therefore, been seeking a new tariff regime to regulate natural gas sector since 2005 to encourage gas companies to operate on market-based rate of return.

The government is willing to put a floor of 13.5 per cent on return on assets and a cap of 17.5 per cent instead of switching over the market-based returns.

The SNGPL, which serves Punjab and Khyber Pakhtunkhwa provinces, is facing a winter peak shortfall of about 1bcfd (billion cubic feet per day), mostly in Punjab. The gas shortage in the province has been estimated to go up to 1.6bcfd by 2015.


Courtesy: Dawn

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