The UFG for the gas companies at 6.3 per cent for the year 2017-18 will be reflected in the gas tariff for 2017-18 in case the government decides to increase the sale price of gas. The gas companies requested Ogra for an increase of UfG at 9.21 percent (46,756 MMCF) in the petition. However, the Ogra has worked out 5 percent UfG benchmark and 1.3 percent local conditions allowance.
The Ogra announced the UFG while finalising the estimated revenue requirement (ERR) of the gas companies. The bench mark was fixed keeping in view key performance indicators (KPIs) and key monitoring indicators (KMIs) which gas companies have to fulfill in the whole year. The regulator finalised the UfG keeping in view the final draft on UfG study carried out by the independent consultants M/s KPMG hired by the Ogra.
In current fiscal year 2017, 1.3 of the 2.6 percent allowance will be added on account of theft, leakage, non-gas consumers and law and order situation. This calculated that 1.3 percent will be added in 4.5 percent basic UfG benchmark and 0.5 percent as transmission loss.
The new formula for calculating UFG allowance is: UfG allowance= gas received x (Rate1+ Rate2xB)
Rate 1= technical component (inherent gas loss in the system)
Rate2= local challenging conditions
B= performance factor (key monitoring indicators)
"Gas loss in the system is the benchmark fixed rate based on prevalent conditions/ infrastructure in the areas of the operation of the Sui companies and same is fixed at 5 percent (258,65.75 MMCF) for the next five years. The fixed rate also includes allowance for transmission losses which is calculated up to maximum 0.5 percent."
"Local challenging condition is the allowance for local challenging conditions as compared to the world at large. This factor is suggested to cover impact of gas losses due to expanding gas supply network in retail law and order affected areas and making it more prone to theft, leakage, data, meter errors and non-recovery of gas bills from such areas. Allowance for these challenging conditions is fixed at a maximum of 2.6 percent."
The performance of Sui companies against KMI shall be validated through an annual review/assessment. Sui companies shall submit a five yearly KMI implementation plan, the achievement of which will be assessed on yearly basis.
To evaluate ERRs in prospective years, the local challenging condition will be taken at 50 percent and the same will be actualized in line with the achievement of proposed KMI to evaluate respective Final Revenue Requirements (FRRs) on submission.
If the company sustains a UfG loss below the benchmark set by the authority, the said gas company will only be given an allowance for UfG at actual levels.
The consultants, KPMG Taseer Hadi and Company, appointed by the Oil and Gas Regulatory Authority (Ogra) have finally recommended the UfG of 7.6 percent, which the gas consumers will pay for the next five years.
The consultants have worked out the actual UfG at 4.5 percent, transmission loss at 0.5 percent and loss on account of certain conditions such as non-gas consumers, law and order situation, theft, leakages, measurement errors, expansion of network on political grounds at 2.6 percent. The 2.6 percent allowance has been linked with 30-35 tough targets. The gas companies will have to erase out the 7.6 percent UfG after 5 years.
Copyright Business Recorder, 2017