Gas Price hike recommended

ISLAMABAD: Gas price are set to increase for all categories with the advent of the new year as the Oil and Gas Regulatory Authority (Ogra) has recommended a price hike of Rs31.12 per million British thermal unit (mmbtu).

The regulator has forwarded the summary to the petroleum ministry, suggesting an increase of Rs31.12 per mmbtu in gas tariff for the Sui Northern Gas Pipelines Limited (SNGPL) and Rs28.28 per mmbtu for the Sui Southern Gas Company Limited (SSGC).

The revised tariff will be effective from Jan 1 to July 1.

The summary said: “After an in-depth analysis of the estimates, the authority examined the petitions of the SNGPL and the SSGC in light of policy framework and relevant rules so that only prudent, cost-effective and economically efficient expenditure should be allowed.”

It said that net increase in gas tariff for the SNGPL had been worked out at 9.87 per cent and for the SSGC at around 6.14 percent.

It said that the SNGPL had sought an increase of Rs67.66 per mmbtu in the average prescribed price from Jan 1 next year primarily because of an increase in well-head gas price due to devaluation of rupee parity against dollar and hike in transmission and distribution cost along with operating cost of new sub-region of Vehari.

The SNGPL had sought permission for Rs9.4 billion additional expenditure on account of distribution, development, new connections, information technology and uncounted for gas (UFG) reduction plan and Rs2bn on account of human resources (HR) cost, it said.

Ogra had asked the ministry to seriously consider the factors to rationalise the consumer gas prices in public interest, the summary said.

LNG projects and infrastructure: In its petition, the SSGC estimated the capital expenditure of Rs1.064bn and revenue expenditure of Rs127 million as part of revenue requirement for the said year. The authority has accepted the SSGC’s request for Rs198m on account of the Natural Gas Efficiency Programme.

To fix UFG level at 7 per cent as requested by the SSGC, the summary noted that UFG disallowance had been calculated at 7 per cent in line with the interim stay granted by the Sindh High Court.

According to the summary, the SSGC has requested Ogra to include in the revenue shortfall of the fiscal 2011-12 the revenue shortfall arising from the determination of Review of Estimated Revenue Requirement (RERR) of 2011-12 as part of the revenue requirement for the
current calculations for gas pricing.

The SSGC has stated that gas development surcharge to the tune of Rs1.66bn billion is available in 2011-12 to adjust the shortfall for the same period.

In view of above factors, a provisional amount of Rs2.00bn has been included in tariff calculation for the year.

Ogra has stated in the summary that the difference, if any, will be adjusted in the forthcoming determinations of gas pricing for both the gas companies.

The authority has appreciated SNGPL efforts to control its line losses and allowed Rs1.5bn expenditure on account of unaccounted for gas (UFG) reduction plan for the year as requested by the company.

Taking into account the point of view of all stakeholders, the authority has determined the UFG benchmark at 4.50 per cent. It has treated the expected proceeds from surcharge and interest on arrears of gas sales as operating income, in accordance with the DERR for the year.

VEHARI SUB-REIGON: The authority has allowed Rs29mn capital and Rs7mn operating expenses under the head of the cost of new sub-region of Vehari for the year in view of operational requirement of the SNGPL.

The authority has allowed an additional amount of Rs1bn on account of HR cost on provisional basis to enable the SNGPL to meet the legitimate demand of its employees, particularly sub-ordinate staff. Final adjustment will be made after the outcome of the HR benchmark study which is in progress.