Ogra raises UFG volume by 2.5pc adding more burden on consumers

Ogra chairman Saeed Ahmad confirms that gas companies have been allowed to charge gas consumers for gas theft, minimum bills

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) has passed the burden of amounting to mammoth Rs25 billion on to the legitimate end gas consumers by increasing the UFG (unaccounted for gas) volume in the gas tariff by 2.5 percent to 7 percent from existing 4.5 percent in its determinations about final revenue requirement of gas utilities – Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipeline Ltd. (SNGPL) for financial years 2012-13 and 2013-14.

The 2.5 percent growth in the UFG will expose the end gas consumers to further financial burden of Rs25 billion and to this effect the inflated bills the consumers will start receiving from January 1, 2016.

The Authority has finalised the determinations on November 5-6, 2015 about the final revenue requirement (FRR) of SSGC and SNGPL for both financial years 2012-13 and 2013-14 with the decision allowing the gas companies to charge one percent from the gas consumers for the failure in collecting the gas bills in the areas where law and order situation has deteriorated.

In addition, the Authority has also allowed the gas utilities to charge 1.5 percent more from the gas consumers in the head of non-gas consumers. The non-gas consumers are those unscrupulous elements who are using the gas with no meters installed at their business houses or workplaces and the numbers of non-gas consumers are very large. However, the determinations do not mention that the UFG has been increased, but at the same time they reveal that the Authority has allowed the gas utilities to increase by one percent the gas tariff in the head of non-recovery of gas bills because of law and order situation and 1.5 percent in the tariff in the wake of the gas being stolen by non-gas consumers.

When contacted, Ogra Chairman Saeed Ahmad Khan confirmed that the Authority has allowed the gas utilities to charge end consumers for the losses the companies are facing because of deteriorating law and order situation in some areas of Baluchistan. Likewise Kark and Kohat in KP are the areas where massive gas theft is being reported and are inaccessible because of ongoing military operations against terrorism.

He also admitted that the Authority has also permitted the gas companies to charge the end gas consumers for the failure in recovery of bills because of non-gas consumers. Khan, however, said he is right now unable to tell how much losses in terms of percentage the gas companies will charge from the consumers.

He kept on insisting that UFG is still there at 4.5 percent and it has not been increased. When asked as to why Ogra has not placed the said determinations on official website, he said that Ogra has sent it to the government for review and after that it will be placed on the official website.

Federal Minister for Petroleum and Natural Resources Mr Shahid Khaqan Abbasi responded saying he has not yet seen the determinations with regard to final revenue requirements of gas utilities for 2012-13 and 2013-14 sent by Ogra. However, the minister said that the issue pertaining to losses is now becoming irrelevant as the gas sale volume is being decreased owing to which the losses volume in percentage has alarmingly increased.

However, the officials at Ogra argued that the regulator has skillfully increased the UFG without naming it by two and half percent inflicting the colossal loss of Rs25 billion to the end gas consumers. The consumers will start getting the inflated gas bills from January 2016. “The UFG for 2012-13 has increased from 4.5 percent to 6.75 percent and for 2013-14 it swelled to 7.25 percent from 4.5 percent. The Ogra has taken this painful decision for consumers without conducting any study about the lines losses of both the utilities.”

The 250-page determination about the final revenue requirement of 2012-13 and the same number of pages determination pertaining to 2013-14 seen by this correspondent divulge that the Authority was asked by the government to accommodate in the tariff more losses of the both the companies to prevent them from the impending economic collapse without using the word of UFG.

In November 2014, the government sent a policy to Ogra asking the authority to accommodate the loss making companies in such a way that the LHC verdict about UFG is not affected and the ongoing accountability case of former Ogra chairman Tauqir Sadiq is also not affected.

Keeping in with the direction of the Ministry of Petroleum and Natural Resources, the regulator was asked to incase the tariff because of losses the companies are sustaining in the wake of gas theft for four reasons that include bulk retail gas consumption, non-gas consumers, law and order situation and minimum billing. The officials said that the said four reasons are already accommodated in the 4.5% UFG that has already been allowed. And the new increase in UFG by 2.5 percent (1 percent because of law and order situation and 1.5 percent due to non-gas consumers) in the final revenue requirement of both gas companies is illegal as under Ogra Ordinance, the Authority cannot increase the UFG in finial revenue requirement.

However, it can increase the UFG benchmark in the estimated revenue requirement. The said decision will trigger to another controversy which may, later on, emerge as a scam. It is pertinent to mention that Tauqir said is facing accountability court case for increasing the UFG to 7 percent from 5 percent.

Meanwhile, share value of both the companies which are virtually at the verge of economic collapse has started showing consistent improvement as if the said information of increasing UFG in the tariff has secretly been leaked to some stakeholders of the gas companies. The share of SNGPL on November 23 traded at Rs31.45 and SSGC at Rs42. The Ogra had earlier set the UFG benchmark of 6 percent in 2005-06 after hectic consultations with foreign concerned firms and local state owned gas companies with the decision that the said UFG will be reduced to 5 percent in 2009-10.

The UFG benchmark was first deviated by Tauqir Sadiq, former Ogra chairman in 2009-10 and second time it is breached by the Ogra in 2015 while deciding the final revenue requirements of both the gas companies for financial year 2012-13 and 2013-14.