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September 20, 2017

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OGRA to pass 6.3pc losses on to consumers in gas tariff from today

OGRA to pass 6.3pc losses on to consumers in gas tariff from today

ISLAMABAD: The Oil and Gas Regulatory Authority (OGRA) is to come up (Wednesday) today with the UFG (Un-accounted For Gas) volume most probably at 6.3 percent that is to be included in the gas tariff in the current year 2017-18. The regulator will include the said UFG volume in the estimated revenue requirements (ERR) of the gas utilities -- Sui Southern and Sui Northern which will also be finalised today, a senior official told The News.

“The Authority will work out the UFG for the gas companies most probably at 6.3 per cent for the year 2017-18, which will be reflected in the gas tariff and taken from the end consumers in the gas tariff for 2017-18. The regulator will finalise the UFG keeping in view the final draft on UFG study carried out by the independent consultants —M/s KPMG hired by the Ogra.”

Ogra chairman Mrs Uzma Adil, when contacted, confirmed that Ogra is going to announce the UFG today (Wednesday) while finalising the ERR of the gas companies. She, however, did not divulge as to how much the allowance for local operating conditions (theft, leakage, non-gas consumers and law and order situation) will be announced in the UFG for the current fiscal. She said that UFG will be worked out keeping in view 30-35 Key Performance Indicators (KPIs) and Key Monitoring Indicators (KMIs) which the gas utilities will have to fulfill in the whole year. The KPIs and KMIs has been worked out by the consultants — KPMG. 

The consultants — KPMG Taseer Hadi and Company, appointed by the Oil and Gas Regulatory Authority (Ogra) has finally recommended the UFG of 7.6 percent, which the gas consumers will pay for the next five years. The consultants have worked out the actual UFG at 4.5 percent, transmission loss at 0.5 percent and loss on account of certain conditions such as non-gas consumers, law and order situation, theft, leakages, measurement errors, expansion of network on political grounds at 2.6 percent. The 2.6 percent allowance has been linked with 30-35 tough targets. The gas companies will have to erase out the 7.6 percent UFG after 5 years.

The regulator which may finalise the estimated revenue requirement of both the gas companies will also announce the UFG at 6.3 percent that will be included in the gas tariff for the current financial year 2017-18. In the first year—2017-18, half of the 2.6 percent allowance will be added on account of theft, leakage, non-gas consumers and law and order situation. This means that 1.3 percent will be added in 4.5 percent basic UFG benchmark and 0.5 percent as transmission loss as the 7.6 percent UFG has been linked with the tough key performance indicators (KPIs) and Key Monitoring Indicators (KMIs).

The sources said that the consultants came up with startling disclosures about the current volume of the UFG which has been on the rise for the last 10 years. Now system loses one billion cubic feet per day (bcfd) in the head of UFG alone, which includes over 400 million cubic feet per day (mmcfd) in the SSGC system and about 550mmcfd in the SNGP system.

Under the directives of the Economic Coordination Committee (ECC), Ogra had allowed various losses in the tariff relating to law and order, minimum billing and theft. 

However, Sui Northern has lashed out at the final draft of the consultants –KPMG saying that in the final draft on UFG study, the consultants have unilaterally introduced the material changes which are not in the interests of the company. 

The Sui Northern in its official response to the final draft of the report of which the copy is available with The News, the said gas company says that the consultants have proposed allowance for local operating conditions (theft, leakage, non-gas consumers and law and order situation) as 2.6 percent which has been worked out by averaging the value of Sui Northern which is 3 percent whereas for Sui Southern is 2.2 percent. It means that Sui Northern is at disadvantage by 0.4 percent whereas Sui Southern is at advantage by 0.4 percent which is unjustified.

The repose of the Sui Northern says that there must be more relief for the company as compared to Sui Southern Gas there is no principle in the world to award right of one party to another. 

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