Gas regulator to outlaw zero tariff gas bids

Vol 13, PW 21 (08 Apr 10) People & Policy

Zero network tariffs in bids for city gas retail licenses will soon be a thing of the past.

India’s gas regulator may have temporarily lost its powers to authorise city gas licenses but it is still issuing regulations. And PETROWATCH learns modification of the much maligned bidding criteria for gas retail licenses is top of the agenda.

“We will not allow zero tariff bids anymore,” says a Petroleum and Natural Gas Regulatory Board source. “These modified regulations will be made public before the end of this month (April).

” In March last year GAIL Gas enraged rivals by winning four cities after bidding zero network tariffs and picking up the full 40% marks for that part of the retail gas license application. During the second auction last year, Adani Energy and partner IndianOil also adopted this ruthless tactic to win Ghaziabad.

Such tactics won’t work anymore, we hear. Setting up a gas retail network is not cheap, with companies required to factor in the following elements in the network tariff: · Gas transportation within the citywide network · Adding a distinct odour to gas so leaks are detected fast · Metering gas flows for others when ‘exclusivity’ finishes · Balancing gas supplies for all those using the network · Gas vented when valves are opened during routine repair and maintenance How can any serious company quote a zero network tariff when each of the above elements has costs attached to it, asks our regulator source “Bidders who quote zero network tariffs will try to recover costs by loading them on to the customer,” he says, “as the final selling price is unregulated.

” Such ‘cross subsidisation’, we hear, will no longer be tolerated. The imminent arrival of new network tariff regulations result from several recent discussion rounds between the regulator and industry groups, triggered by widespread outrage at the zero network tariff bids by GAIL Gas and later by Adani Energy with IOC.