CRCP Contested Gas Price Increase in OGRA

July 30, 2002

Islamabad: Today Consumer Rights Commission of Pakistan (CRCP) pleaded against the price increase demanded by Sui Nothern Gas Company Limited (SNGPL). Oil and Gas Regulatory Authority (OGRA) was approached by the SNGPL for tariff increase in order to ensure 17. 5 percent profit margin.

While representing the interests of consumer, particularly domestic consumers CRCP presented the case before OGRA with a request to reject the petition as SNGPL has failed to improve its efficiency parameters and quality of service.

Gas losses "Unaccounted for Gas" (UFG) or in simple terms line losses of SNGPL continue to be on the very high side. These losses stand at 8.13 % as on March 2002 whereas the International standards of UFG are assumed as 6% by American Gas Institute. CRCP has calculated and translated the amount of gas losses and found that that one percent reduction in UFG amounts to a saving of Rs. 415.73 million. CRCP pleaded that it is extremely unjust that the related inefficiency cost is being passed on to consumers.

SNGPL is legally entitled to 17.5% return on average net fixed assets. Such legal entitlement benefits the company whether it performs good or bad. CRCP maintains that such entitlement should not be the sole criterion for allowing the petitioner to meet its revenue shortfall from Gas Development Surcharge

More than Rs. 175.000 million in 1999-2000 and Rs. 251.128 million in 2000-01 had been written off as bad debts or stated under the head of provision for doubtful debts. Company has projected that Rs. 200.000 million will be written off in 2001-02 as well.. CRCP stressed that this method of reducing the outstanding dues is unjust because it unduly adds to the burden of consumers who regularly pay the utility charges. CRCP requests the Authority to direct SNGPL to take step for recovery of such unsecured debts

SNGPL maintenance charges have increased from Rs. 188.071 million (2000-01) to Rs. 302.687 million (2001-02) without giving any details of maintenance charges. This amounts to about 75% increase in maintenance and repairing cost in just one year. CRCP requested OGRA to look in to the matter of this grave inefficiency.

On the basis of above points, Mr Aftab Alam, representing CRCP requested OGRA to dismiss SNGPL petition for increase in tariff as it would be highly unfair for the consumers to pay for the gross inefficiency of the Sui gas company.