Can SNGPL Charge For Pressure Factor Across The Board?

The Lahore High Court in Sui Northern Gas Pipelines Limited v. Oil and Gas Regulatory Authority (Writ Petition No. 40897 of 2019) dealt with the issue of recovery of charge for Pressure Factor across the board from domestic consumers by Sui Northern Gas Pipelines Limited (“SNGPL”).

SNGPL challenged decisions dated 15.01.2019, 27.02.2019 and 31.05.2019 (‘‘the impugned decisions’’) passed by the Oil and Gas Regulatory Authority (“OGRA”) under Section 12(2) of the Oil and Gas Regulatory Authority Ordinance, 2002 read with Article 199 of the Constitution of Islamic Republic of Pakistan, 1973. Whereby, OGRA directed SNGPL to refund all amounts charged to the domestic consumers in excess, under the head of Pressure Factor since July 2018 to February 2019. SNGPL argued that OGRA has wrongfully decided that SNGPL can recover Pressure Factor only from those domestic consumers who are using gas in excess of 8 inches of water column pressure and not otherwise.

SNGPL further argued that the consumers are required to pay SNGPL for the actual delivery of pressure availed by them. The Standard Domestic Gas Supply Contract (“Gas Contract”) regulates the relationship between domestic consumers and SNGPL; and OGRA has approved and notified the terms of the Gas Contract after obtaining feedback from all stakeholders. Clause 11 of the Gas Contract clearly provides that natural gas shall be supplied at a pressure not exceeding 8 inches of the water column aboveatmospheric pressure. Gas meters installed for domestic consumers only measure the volume of gas flowing through it and there is no inbuilt system to measure any changes in pressure. So, if any domestic consumer consumes gas at a higher pressure than that allocated to it by the SNGPL, it will result in incorrect billing on account of misappropriation of gas, as the consumer does not pay for the quantity of gas it has actually consumed.

The volume of gas is recorded in cubic feet or cubic meters on the meter, which is converted to energy units based on the average BTU per cubic foot recorded on the calorimeters or gas chromatographs for the particular locality where the consumer is located. However, when the consumer is found tampering with the meter, regulator, service pipe or other installations and has obtained gas at a higher pressure, such consumer is liable to pay the SNGPL gas charges which commensurate with the gas consumed.

SNGPL further argued that it conducted an extensive exercise of physical verification at the premises of consumers who were misappropriating the gas and billed them accordingly. As per clause 19 of the Gas Contract, SNGPL can recover charges for excess Pressure Factor to prevent gas misappropriation. The decision of OGRA to refund all amounts to consumers which have been ‘collected under the head of Pressure Factor’ is based on a direction issued by the Federal Government and is not an independent reasoned direction of OGRA.

Furthermore, SNGPL also executed a policy dated 30.10.2008 (“Pressure Factor Policy”) regarding the application of Pressure Factor to domestic consumers. As per, Pressure Factor Policy, if a consumer is found using gas in excess of 8 inches water column pressure, then the Pressure Factor corresponding to the actually delivered pressure should be applied. Further, argued that although there has been a decline in gas reserves, overall usage of gas has increased at the same time and there has been a shortfall in power generation.

OGRA argued that the issue is regarding the application of Pressure Factor across the board to all domestic consumers without carrying out a detailed physical verification of each and every consumer by SNGPL. OGRA has relied upon Clause 19 of the Contract which provides that if a consumer tampers with a meter, regulator, service pipe or other installations to secure more supply than is recorded on the meter or to obtain gas at a higher pressure than maintained by SNGPL, that consumer is liable to pay gas charges commensurating with the consumption of gas as ascertained by the SNGPL for the relevant period in accordance with company’s policy on theft of gas. Thus, SNGPL has to physically verify and establish that a particular consumer has tampered with the gas installations and thereby consumed more gas or obtained gas at a higher pressure than that it is entitled to.

Further argued that the SNGPL applied Pressure Factor to domestic consumers on the presumption that each and every domestic consumer has wrongfully obtained gas at a higher pressure than that it is entitled to and SNGPL admits this fact in the correspondence with it. In this regard, SNGPL itself formulated the Policy, yet they failed to provide all the verification documents on the basis of which they billed the domestic consumers for Pressure Factor.

Honorable Ayesha A. Malik J. held that where a consumer is found to be tampering with the Pressure Factor, the SNGPL can either terminate the Gas Contract under Clause 18(iv) or thereby disconnect the supply of gas or else it can be compensated, by charging the consumer for the excess amounts of gas consumed under Clause 19. As per the Pressure Factor Policy, no recovery can be made prior to the date of inspection. This Policy itself stipulates that there has to be a physical verification by a responsible Engineer/Supervisor who has to confirm that the consumer has been tampering with the gas installations for procuring higher pressure of the gas.

The Court further observed that SNGPL’s contention that it has carried out physical verification of all consumers and has billed them for Pressure is negated by its own correspondence with OGRA. In letters No. RA-Pressure Factor- 001-19 dated 25.01.2019, RA-Pressure Factor-002-19 dated 04.02.2019, RA-Pressure Factor-003-19 dated 15.02.2019 and RA-Pressure Factor-004- 19 dated 25.02.2019, the SNGPL has stated as follows:

  1. Continuous surveillance of all domestic consumers on monthly (as in case of industrial consumers)/quarterly (as in case of commercial consumers)/annual basis is not possible with available resources and may not be a feasible economical option for the SNGPL.
  2. SNGPL has billed all the domestic consumers across the board under the head of Pressure Factor and has been advertising Pressure Factor application to domestic consumers in print and electronic media.
  3. On the basis of available resources, only one million domestic consumers can be inspected annually which will also take a considerable period of time and even if the Pressure Factor is charged to those consumers who are tampering with the gas installations, SNGPL apprehends that those consumers will again resort to the illegal pressure enhancement to meet their gas load requirement.

On the basis of aforesaid, it is evident that the SNGPL has not physically verified each and every domestic consumer to conclude that they have tampered with the gas installations and manipulated the Pressure Factor. SNGPL admits that it has applied Pressure Factor across the board on all the domestic consumers which include those consumers who have not manipulated the Pressure Factor nor caused any loss to the SNGPL.  Consequently, charging of Pressure Factor to every gas consumer is a presumptive exercise carried out by SNGPL which has been repeatedly considered by OGRA and rejected on account of there not being sufficient evidence to support its claim to charge Pressure Factor to all the domestic consumers.

This practice was rightly rejected by OGRA through the impugned decisions on the ground that there cannot be a presumptive calculation with respect to Pressure Factor. The domestic consumers can be made liable to pay for Pressure Factor, on the basis of physical verification and an inspection report which finds that the specific consumer has tampered with the gas installations and enhanced the Pressure Factor.

Finally, the Court observed that no illegality or irregularity has been found in the impugned decisions of OGRA. Therefore, SNGPL does not have any option but to comply with the orders of OGRA. In terms of the preamble of the Ordinance 2002, OGRA is mandated to protect the public interest while respecting individual rights. The stance of the SNGPL that it is entitled to charge all domestic consumers with Pressure Factor on account of enhanced demand for gas and enhanced use of illegal modes to fulfil gas requirements do not justify charging all domestic consumers with Pressure Factor as per the terms of the Gas Contract.

Even otherwise, the SNGPL cannot devise its own reasons for billing all domestic consumers for illegality which has not been established. Hence its charging of Pressure Factor is illegal.

It is a very good decision of the Court and the judgment has upheld the rule of law in the country. By this landmark judgment, the Court has rightly rejected the stance of SNGPL as the Company cannot charge pressure factor across the board from all domestic consumers without physically checking first who has tempered with gas installations as per clause 19 of the Gas Contract and Pressure Factor Policy. Even otherwise, it seems unreasonable on the part of SNGPL to charge all consumers across the board without verifying who has made theft. It is an established principle of law that everyone is innocent unless proved guilty. SNGPL seemingly ignored the principles of fairness and justice that are implicit in every law and policy.

SNGPL can take only those actions which are permissible under the law and its policy. Charging Pressure Factor from every gas consumer through presumptive exercise is illegal. If SNGPL has operational issues they should be resolved with the upgradation of the gas supply system with the integration of the latest technology; it cannot unnecessarily inflate the bills of domestic consumers for its own mismanagement.

In a nutshell, the judgment has provided a huge relief to gas consumers and has held a regulatory authority accountable under the law and policy. Indeed, it promotes rule of law and constitutional governance in the country.

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