The government is considering a major shift in gas price revisions, moving from biannual to quarterly notifications. This change is designed to boost the financial stability of public gas utilities and address the growing issue of circular debt. Gas companies are also seeking approval to automatically pass on energy costs to consumers, similar to electricity firms. The current system involves the Oil and Gas Regulatory Authority (Ogra) conducting public hearings and setting revenue requirements, which are then notified to the federal government for end-consumer prices. The government's current biannual tariff notifications, which apply to different consumer categories, include cross-subsidy, where some consumers subsidize gas prices for low-income groups. However, late notifications are impacting the financial health of utilities, leading to increased circular debt. The government aims to eliminate cross-subsidy and introduce a budgeted subsidy, with exploration and production companies recovering billions from gas utilities. This issue was discussed during negotiations with the International Monetary Fund (IMF) to replace cross-subsidy with a direct subsidy based on consumer income levels. The Petroleum Division has engaged with the IMF and aims to implement the new system by 2026, with KPMG providing advisory services. Residential consumers benefit from a significant cross-subsidy, which is financed by higher tariffs on captive power plants, industrial, and commercial consumers. Aligning with IMF reforms, a levy has been imposed on captive power plants, increasing gas prices and reducing the ability to cross-subsidize residential consumers.
