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ISLAMABAD: The Oil and Gas Regulatory Authority (OGRA) held a public hearing at Karachi on Thursday on a petition of the Sui Southern Gas Company Limited (SSGCL) for an increase of 44.8 percent in gas prices to meet revenue shortfall for financial year 2022-23.

The gas company has projected average Prescribed Price at Rs1,013.02 per mmbtu. It has also projected RLNG cost of service at Rs16.47 per mmbtu with effect of July 1, 2022.

The petition was filed before the OGRA on February 14, 2022 for Determination of its Estimated Revenue Requirement (DERR)/ prescribed prices for Financial Year 2022-23.

An amended petition was filed on March 9, 2022 segregating revenue requirement petition in terms of activities, i.e., transmission, distribution and sales.

The petition said that the gas company had sold gas worth Rs263.5 billion and its operating cost stood at Rs25.1 billion. Its return on asset was Rs7.9 billion.

The company had requested to allow subsidy of Rs1.37 billion on LPG air mix projects and Rs15 billion on account of UFG adjustment on LNG volume handled basis. The company contended that it is facing total revenue shortfall of Rs88 billion and sought over 44 percent increase in gas prices effective from July 01, 2022 to meet revenue requirement.

The SSGC has also claimed capital expenditure amounting to Rs37,618 million against indigenous and RLNG the expenses claimed against UFG control activities are justified in view of 13.98 percent UFG projected by the company.

Besides, the petitioner (SSGC) has estimated RLNG cost of service at Rs16.47 per MMBTU with effect from July 01, 2022.

The petitioner has projected Rs1,395 million for laying of 189km distribution mains to connect various new towns and villages. The key issues are whether the company’s claim on account of transmission and distribution costs at Rs22,585 million for FY 2022-23 is prudent, considering the fact the indigenous gas supplies are declining.

The question raised in the hearing was whether the claim of the company of Rs2,761 million on account of Expected Credit Loss in the light of compliance of IFRS 9 is justified based on the fact that the company is operating under monopolistic regime and is less exposed to financial risk.

The other question in public hearing was whether the claim of the company for addition of 132,000 new domestic gas connections on indigenous gas and 713 commercial/ industrial connections on RLNG are justified, while ensuring continuity and security of gas supply to existing, as well as, prospective consumers.

The question raised in public hearing was whether the company’s proposed expansion of distribution network of 1,123km amounting to Rs7,719 million is prudent, considering the fact that the SSGCL no longer holds exclusivity to develop gas schemes in its franchised area of Sindh and Balochistan provinces.

Copyright Business Recorder, 2022

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