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Ogra cuts rate for Sui Southern gas by Rs10 per unit

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) has reduced the prescribed price for the Sui Southern Gas Company (SSGC) by Rs10 per unit owing to a series of inadmissible expenditures on system expansion in Balochistan and Sindh, including revenue losses in Karachi on account of law and order problems.

The SSGC had secured through a review petition a Rs4.59 per unit increase, over and above the current average prescribed price, with effect from July 1, 2015, as part of final revenue requirement (FRR) for the financial year 2015-16. It wanted the prescribed price fixed at Rs368 per MMBTU instead of the existing rate of Rs363.5 per unit, which would yield total revenue of Rs149.5 billion.

After the public hearing and examination of accounts, the regulator concluded that the company’s prescribed price actually needed to be reduced by Rs9.76 per unit beca­use it was seeking to recover a number of unjustifiable expenditures. Ogra determined the average prescribed price at Rs358.3 per unit to achieve around Rs146.13bn in revenue.

The SSGC had claimed around Rs166 million to provide for ‘doubtful debts’ for commercial and industrial consumers on account of the deteriorating law and order situation in Karachi during the financial year 2014-15, which badly affected its recoveries from commercial consumers. The company had demanded that Rs67m for M/s GPG (an industrial consumer) and Rs98m for commercial consumers be treated as doubtful debt.

The regulator did not accept these demands, saying the Sindh High Court had directed M/s GPG and others to pay the arrears in installments and that the company should recover the amount itself.

Regarding commercial consumers, Ogra ruled that the SSGC had only provided numbers without a concrete justification. “Referring to the law and order situation in Karachi without providing documents and analysis with respect to total provision and percentage of Karachi city in total share is not tenable,” Ogra said.

The regulator noted with concern that the SSGC had, for the first time, sought a provision for non-recoveries from active consumers on account of Rs250m late payment surcharge from industrial consumers and Rs323m from Habibullah Coastal Power Limited.

It held that since the company did not raise these demands at three different stages this demand did not hold water.

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Azhar Hashmi

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