SNGPL’s gas tariff increase request opposed

ISLAMABAD: Gas consumers of Khyber Pakhtunkhwa have opposed a petition filed by the Sui Northern Gas Pipelines Ltd (SNGPL) with the Oil and Gas Regulatory Authority (Ogra) seeking an increase in tariff.

Ogra conducted a hearing in Peshawar to determine the SNGPL’s estimated revenue requirement and prescribed prices for the financial year 2010-11, says a handout issued here on Monday. The hearing was attended by representatives of various associations, members of media, consumers, textile and compressed natural gas industry, SNGPL management and others. The consumers said that Khyber-Pakhtunkhwa is a war-torn province, which has seen a considerable outflow of investment and closure of most of the industry.

Any tariff increase will further hurt the people of the province and halt industrial and commercial activities, they said. They expressed reservations about high gas bills owing to wrongly calculated units and about low pressure leading to malfunctioning of mechanical meters. They called for a halt to expenditures on system expansion plans due to shortage of gas. The consumers said that the Federal Board of Revenue (FBR) must implement a 50 per cent relief on the general sales tax announced by the prime minister.

The participants of the hearing also expressed reservations about the high unaccounted for gas (UFG) level, meaning losses due to theft and leakage, of the SNGPL and demanded that no relief in that benchmark be given at the cost of consumers. The gas utility was told to make efforts to cut its operating cost and control gas theft to avoid the increase in tariff. Cross-subsidy mechanism must be abolished, the participants said. Ogra Chairman Tauqir Sadiq, who chaired the hearing, said that the authority will protect rights of all stakeholders in accordance with the law and in the best interest of people.

SNGPL representatives made a presentation and gave reasons for the estimated revenue requirement and prescribed prices. They also responded to a number of questions raised by the participants. The SNGPL filed a petition on December 3, 2009 under Section 8(1) of the Ogra Ordinance 2002 and Rule 4(2) of the Natural Gas Tariff Rules 2002 to determine its estimated revenue requirement for 2010- 11. It requested for an increase of Rs20.36 per million British thermal unit (mmbtu) in its average prescribed price from July 1. The SNGPL said that this will help the gas utility to recover a shortfall of Rs12,897 million after taking into consideration the changes in the cost of gas which it has to pay to gas producers.

The company said it has sought the increase in prices mainly due to a projected rise in the cost of gas, which is linked to the price of crude oil and fuel oil in the international market, in accordance with the Gas Price Agreements signed between the government and gas producers and the exchange rate of rupee against US dollar. The petitioner also sought a relief in unaccounted for gas (UFG) benchmark from existing 5 per cent to 7 per cent. Winding up the hearing, the Ogra chairman said that it is the duty of the authority to balance divergent interests of utility companies and consumers.