Oil and Gas Regulatory Authority (Ogra) has allowed two gas companies to recover up to additional 2.6 percent unaccounted for gas (UFG) for the last five years in a review motion. From financial year 2012-13 to 2016-17, the Economic Coordination Committee/federal government directed OGRA to allow certain volumes on account of non-consumer/law and order on account of UFG losses due to factors beyond control of the Sui Companies subject to the final study on UFG to be conducted by OGRA.
The OGRA had, however, allowed 70-80 percent in pursuance of the said decision subject to finalisation of the UFG study. After the UFG study had been completed, which recommended 2.6 percent on account of factors beyond control of the Sui Companies was linked to certain Key Monitoring Indicators (KMIs) which would aim at controlling the UFG on account of theft.
The OGRA decided to close the final revenue requirements as per past decisions. The Sui companies time and again contested this treatment and filed review petitions with OGRA for a fair decision. The OGRA stuck to its decision of ad hoc adjustments due to which the ECC/federal cabinet had to again intervene and issue policy guidelines which supported the Petroleum Ministry's view which is stipulated as: "Petroleum Division is of the considered view that the very purpose of the UFG study is not only to provide realistic UFG benchmark linked with efficiency but it also has to address the adjustments/provisional determinations of UFG disallowances which were to be reconciled and adjusted subsequently. The Authority (OGRA) from FY 2012-13 onwards had provisionally allowed volumes in the light of policy guidelines to be reconciled with the results of UFG study since no independent expert opinion was available as required by law. Accordingly, this Division proposes that OGRA may reconcile and finalise/adjust the provisional UFG benchmarks sets from FYs 2012-13 to 2016-17 in pending/next determinations of revenue requirements of the Sui Companies in line with the recommendations of the UFG Study i.e. the benchmark set i.e. 7.6% (fixed benchmark of 5% plus UFG plus 2.6% for local conditions) so as to ensure that the gas companies continue to remain financially viable and sustainable."
The Sui companies again filed reviews to OGRA for compliance with the federal cabinet's policy guidelines given under section 21 of the OGRA Ordinance 2002. Stating the fact that Supreme Court of Pakistan, in the suo moto case No. 1/2013 dated 26.06.2018, while referring the Section 21 of the OGRA Ordinance decided as follows:
"The language of Section 21 of the Ordinance is very clear in that the federal government can issue guidelines and there is no check on the power of the federal government to that effect. It is also absolutely clear that OGRA, in terms of such guidelines, has to perform its functions, however, the only condition is that the guidelines should not be inconsistent with the provisions of OGRA. If that being so, OGRA shall comply with the same. Disposed of accordingly."
The OGRA had communicated its decision and its logic to the federal government in detail, however the federal government decided that OGRA's action in past to allow ad hoc amount on non-consumer/law and order itself was based on provisional determinations which should be finalised now in the light of the final study.
Conceding to the higher forums i.e. federal cabinet and the Supermen Court's decision on implementation of policy guidelines, the OGRA decided to end the years old controversy and unnecessary prolonged litigation on this account specially after considering the meagre financial impact of the same on consumers and hence by majority decided to allow the maximums of the claims made by the Sui companies on account of non-consumer/law and order viz-a-viz the benchmark of 2.6%.
It is pertinent to note that SSGC had claimed a maximum of 2.44% and OGRA had already allowed 1.57% in the FY 2012-13 to FY 2016-17 thus 0.87% was further allowed and it is now capped to 2.44% and the financial impact of this shall not be passed on to the consumers. In case of SNGPL they had claimed 3.29% for the same years against which OGRA, the authority, had allowed 2.49% now only giving 0.11%. However OGRA limited their claims to a maximum of 2.6% the financial impact of which shall be staggered in the next five financial years which amounts to an increase of less than 50 paisas per MMBTU.
This decision shall end the constant litigation on this account and lay to rest the continuous friction between the Sui companies and the regulator. The regulator will also be cognizant of the fact that it is also bound by certain laws and cannot take arbitrary decisions in the name of the best interest of the consumers, as had this decision not been taken, the equity of SSGC would have been wiped out and it would become simply a burden on the national exchequer.
It is up to the Sui companies to improve their performances and become sustainable in future as they cannot expect to be bailed out by the federal government always. The Sui companies need to control their UFG losses which are simply not possible without internal collusion.
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