Gas utilities seek tariff increases of 21pc and 121pc for FY27

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) has scheduled public hearings in Lahore and Karachi on May 12 and 13 on petitions filed by the country’s two gas utilities, which are seeking substantial increases in prescribed tariffs for 2026-27.

According to the regulator’s proceedings, Sui Northern Gas Company Ltd (SNGPL) and Sui Southern Gas Company Ltd (SSGCL) have sought tariff increases of about 21 per cent and 121 per cent, respectively, to meet their revenue requirements for the next fiscal year.

Ogra had earlier deferred hearings planned for April 21 and 22, citing uncertainty in gas prices, particularly liquefied natural gas (LNG), amid the ongoing crisis in the Middle East. However, the regulator is required under the law to issue its determination at least 40 days before June 30 so that the government can propose any changes in consumer tariffs.

The government has also committed to the International Monetary Fund (IMF) to issue gas rate notifications on time twice a year to prevent any further accumulation of circular debt, which has already crossed Rs3 trillion. Gas tariffs are required to be revised from July 1.

Consultant proposes lower UFG allowance

It was disclosed on Monday that Ogra’s independent consultant, KPMG Taseer Hadi & Co, has proposed a gradual reduction in the allowance for unaccounted-for-gas (UFG) losses to be passed on to consumers over the next five years.

The consultant has recommended a UFG allowance of 6.5pc for FY27, 6.3pc for FY28, 6pc for FY29, 5.8pc for FY30 and 5.5pc for FY31 for both companies. In addition, it proposed an extra allowance of 0.5pc for SNGPL on account of local challenges and 1.7pc for SSGCL.

Under this proposal, SNGPL’s UFG allowance would stand at 7pc in FY27 and decline to about 6pc by FY31. For SSGCL, the allowance would be 8.2pc in FY27 and 7.3pc in FY31.

At present, the system loss allowance built into prescribed gas prices is about 7.6pc, including a 2.6pc performance-based UFG allowance. The actual UFG losses currently stand at 8.8pc for SNGPL and 13.6pc for SSGCL.

ECC framework and RLNG pricing issue

The consultant also referred to an Economic Coordination Committee (ECC) decision from 2016 under which transmission loss was to be determined and charged at actual, subject to a maximum of 0.5pc, to be shared by gas companies according to the length of the transmission line involved. Distribution loss, it said, was also to be determined and charged at actual.

The decision further stated that losses for customers located on high-pressure transmission lines, as well as those willing to lay dedicated lines from SMS/TBS, would also be determined and charged at actual. For other customers connected to distribution lines, the actual average UFG for the previous financial year would be used in the determination.

The consultant said this mechanism has effectively raised the RLNG sale price by around Rs1,500 per million British thermal unit (mmBtu), an amount it noted is almost equal to the prescribed price for domestic gas.

SNGPL has requested that its prescribed price of Rs1,853 per mmBtu be raised to Rs2,084 in the next fiscal year, including the cost of LNG diversion.