While setting aside the Oil and Gas Regulatory Authority’s (Ogra) four determinations of November 11, 2020 for the months August-November 2020 to the extent of the unaccounted-for-gas (UFG) loss for transmission and distribution sector consumers for RLNG, the Lahore High Court (LHC) Monday issued directives to the Ogra to determine the UFG loss in the matter in accordance with Policy Guideline of June 27, 2016.
UFG is defined as loss and leakage of gas in systems of gas distribution companies, which are then charged from consumers. However, Ogra during November 2020 reduced the UFG rate to 6.3% while notifying RLNG prices from August to November 2020. Earlier, Ogra had allowed 11-17% UFG recovery to the gas utilities on the distribution of RLNG to the consumers.
SNGPL’s UFG stands at 11% while the UFG for Sui Southern Gas Company (SSGC) is on the higher side at 18%. However, consumers using domestic gas bear a burden of 6.3% UFG. The Ogra pointed out that since such gas consumers were being charged 6.3% UFG, it also applied the same rate to RLNG consumers.
After hearing both the parties on Monday, a single-bench of the LHC comprising Justice Shahid Karim said the court accepts the prayer of the SNGPL in the matter.
Appearing before the court, the SNGPL counsel contended that on November 11,2020, the Ogra has issued four separate determinations of RLNG sale price for the months of August, September, October, and November 2020 saying, “These determinations, instead of charging UFG at actual average UFG of last financial year for the consumers on the RLNG distribution network”. He argued that the Ogra charged UFG at 6.3 percent for distribution segment customers and 0.38 percent for transmission segment customers of the SNGPL.
The counsel prayed the bench to set aside the impugned determinations of November 11,2020 for the months of August, September, October and November to the extent of the UFG loss for transmission and distribution sector consumers for RLNG. Besides, he sought the court’s directives to the Ogra to determine the UFG loss for RLNG in accordance with the Policy Guideline of June 27, 2016.
Terming the determinations arbitrarily imposition of UFG benchmark in RLNG prices for August to November 2020 the counsel argued that it had no relation to the actual loss sustained by the SNGPL in the previous year/years.
Raising objection over the Ogra’s determinations, the SNGPL counsel argued that decision of the Ogra in the current matter is not only likely to cause substantial loss to the company but to the survival of the whole RLNG supply chain. He further contended the decision will have great impact as Pakistan’s energy security will be at stake as the lesser recoveries to the SNGPL will ultimately lead to its defaults towards LNG suppliers (PSO and PLL) and they in turn may have to default their international commitments.
Meanwhile, soon after the court verbal orders in the matter, SNGPL Company Secretary Imtiaz Mehmood conveyed material information to Pakistan Stock Exchange Limited (PSX) saying while determining the RLNG prices, the Regulator (Ogra) since August 2020 has diverged from the decision of the ECC of the Cabinet issued in this regard and started applying consolidate System Gas UFG benchmark on the RLNG consumers of distribution segment.
He expressed, “The Regulator, however, didn’t consider the fact that the benchmark of system gas consumers is a consolidated benchmark and is applicable for both transmission and distribution consumers, therefore, cannot be applied on one segment i:e distribution only”.
“Today, the Honorable Court concluded the case after hearing both the parties at length and announced in the open court that SNGPL’s petition is allowed. Written decision is, however, awaited. This decision will however, have no impact on the financial results for the first quarter ended September 30,2020 already declared as the Company was confident of a favorable decision in this regard”, company secretary said.