Review petition for ERR: Ogra approves Rs 75 billion extra revenue for gas utilities

The Oil and Gas Regulatory Authority (Ogra) has approved Rs 75 billion additional revenue for both gas companies - Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) - in a review petition for ERR (Estimated Revenue Requirement) for the financial year 2018-19. According to notifications of Ogra, the oil and gas regulator has allowed an increase of Rs 50 billion for SNGPL and Rs 25 billion for SSGC to meet the revenue shortfall. The regulator has approved an increase of Rs 120 per mmbtu for SNGPL and Rs 69 per mmbtu for SSGC.
On September 16, 2018, the government had already increased natural gas prices by up to 143 percent to recover Rs 94 billion from consumers. The objective of the increase was to reduce the combined revenue shortfall of the two gas utilities from Rs 152 billion to Rs 58 billion. Whereas, the Ogra had proposed 186 percent increase in gas prices to meet the revenue shortfall being faced by both the gas companies.
The Ogra provisionally determined the revenue requirement at Rs 280,347 million while the sales revenue is worked out at Rs 229,557 million. "There is Rs 50,790 million shortfall in estimated revenue requirement for the year." The Ogra has worked out increase in average prescribed prices to Rs 119 per mmbtu effective from July 1, 2018.
The authority observes that in the instant review of estimated revenue requirement for financial year 2018-19, the revenue shortfall has primarily emerged owing to inadequate revision in gas prices in respect of Determination of Estimated Revenue Requirement (DERR) for financial year 2018-19. This backlog on account of insufficient revision in gas sale prices is persistently pilling up. In FRR financial year 2017-18, it was determined at Rs 142 billion and if gas prices are not increased for the year under review i.e. financial year 2018-19, the total revenue shortfall as on June 30, 2019 would be approximately Rs 164 billion. Recovery of the said shortfall in the remaining period of financial 2018-19 may require increase in gas prices by the federal government manifolds.
For SSGC, the authority provisionally determines the revenue requirement at Rs 231,880 million while the sales revenue is worked out at Rs 206,947 million. "There is Rs 24,933 million shortfall in ERR for the year."
Increase in average prescribed prices is worked out at Rs 69.10 per mmbtu effective from July 2018. "The revenue shortfall was due to inadequate revision in gas prices in respect of DERR financial year 2018-19 and due to increase in cost of gas owing to rupee-dollar parity," the authority observes. The gas utility has also been directed that domestic consumers' gas pressure does not exceed 8 inches of water column. The management of SSGC has been further directed to make reverse adjustments of this account in the gas bills of those consumers to whom pressure factor in violation of the standard contract has been applied by the gas company.
The oil and gas regulator also advised the SNGPL to ensure early compliance of condition number 34 which obliged to ensure continuous and reliable supply of natural gas to its existing consumers.