Oil regulator cracks down on city gas firms, seeks uniform piped gas price for household kitchens

PNGRB has ordered city gas retailers to charge a uniform price for piped natural gas to households, regardless of consumption levels, to curb the practice of charging higher rates beyond a usage threshold. The regulator has sought to promote the adoption of natural gas across domestic households and the transport sector.

The Petroleum and Natural Gas Regulatory Board (PNGRB) has issued a directive to city gas distributors, mandating a uniform pricing structure for piped natural gas (PNG) supplied to households, regardless of consumption levels. This move aims to address concerns surrounding the practice of charging differential prices based on usage thresholds, which has been criticized for potentially facilitating the misuse of subsidized administered price mechanism (APM) gas by commercial consumers [1].

Under the current directive, certain city gas distribution (CGD) entities have been implementing a telescopic pricing structure for domestic consumers, where the per standard cubic meter (SCM) price of natural gas escalates as consumption surpasses a predefined threshold. This practice has raised concerns that it may enable commercial consumers to misuse subsidized gas by being misclassified as domestic consumers [2].

PNGRB has emphasized that genuine domestic consumers with higher consumption levels may be unfairly subjected to elevated charges, despite the government supplying natural gas to CGD entities at a uniform APM rate. The regulator has advised city gas companies to undertake a thorough review of consumption patterns and investigate anomalous cases where domestic consumers exhibit significantly higher usage relative to industry averages. Based on these findings, suitable corrective measures will be taken [1].

The directive is part of PNGRB's broader efforts to ensure fair pricing and prevent the misuse of subsidized gas. City gas companies are expected to comply with the new directive and implement uniform pricing structures for household fuel, regardless of consumption levels. This move is aimed at promoting the adoption of natural gas across domestic households and the transport sector, as natural gas is supplied to CGD entities at a concessional rate compared to market or spot LNG prices [2].

The directive comes in the context of a broader trend in the natural gas industry, where companies like Kinder Morgan Inc. (NYSE:KMI) are navigating opportunities and challenges in the sector. Kinder Morgan, a leading energy infrastructure company, has been transitioning towards becoming a pure-play natural gas company, capitalizing on the growing demand for natural gas infrastructure. The company's recent developments, such as reaching a Final Investment Decision (FID) for the Trident project and securing new commitments on the Kinder Morgan Louisiana Pipeline (KMLP) project, underscore its commitment to meeting the rising demand for natural gas transportation and storage [3].

In summary, PNGRB's directive to implement uniform pricing for household natural gas is a significant step towards ensuring fair and transparent pricing practices in the sector. This move is aimed at promoting the use of natural gas across domestic households and the transport sector while preventing the misuse of subsidized gas by commercial consumers.

References:
[1] https://www.ainvest.com/news/pngrb-directs-city-gas-companies-volume-based-pricing-household-fuel-2507/
[2] https://www.thehindu.com/business/supply-png-to-households-at-a-uniform-rate-pngrb-tells-cgd-firms/article69816103.ece
[3] https://ca.investing.com/news/swot-analysis/kinder-morgans-swot-analysis-natural-gas-giants-stock-faces-crude-volatility-93CH-4107293