Discussion document on the minimum and maximum prices for Piped Gas..

Transcription

1 ENERGY REGULATOR OF SOUTH AFRICA Discussion document on the minimum and maximum prices for Piped Gas.. 1. Introduction 1.1. The Gas Act, 2001 (Act No. 48 of 2001) requires the Energy Regulator to administer and enforce the pricing provisions of the Agreement Concerning the Mozambican Gas Pipeline between the Government of the Republic of South Africa and Sasol Limited ( Schedule One to the Agreement ) Schedule One to the Agreement prescribes in clauses 9 to 14 the method to be followed in calculating the maximum and minimum prices for pipedgas. More specifically, clause 9 deals with maximum piped-gas prices for distributors and reticulators; clause 10 deals with maximum piped-gas prices for Greenfields customers and clause 14.4 deals with minimum piped-gas prices On the 21 April 2010, the Energy Regulator determined the maximum and minimum prices for piped gas for the 2008/09 financial year as prescribed in clause 9 to 14 of Schedule One to the Agreement The Energy Regulator invite interested parties to submit written presentations and also attend public hearing regarding the following; (i) maximum prices for distributors and reticulators for 2008/09 financial year; (ii) maximum prices for Greenfields customers for 2008/09 financial year; and

2 (iii) minimum prices for gas customers from April 2008 to March In particular interested parties are requested to compare these preliminary maximum prices to actual piped gas prices and provide any information to the Energy Regulator that it should take into consideration in making this determination. 2. Applicable Law Maximum prices to Distributors and Reticulators 2.1 In terms of Clause 9 of Schedule One to the Agreement, Sasol must negotiate the price of gas with all distributors and reticulators on an individual basis, but subject to the maximum price levels. However, prices for distributors and reticulators purchasing quantities in excess of ten (10) million Gigajoules per annum are not subjected to a maximum price level. Table 1 below shows the maximum price levels for Distributors and Reticulators. Table 1: Maximum price levels for Distributors and Reticulators Volume Category Maximum price level ( Gigajoules per annum) Resellers Reference Price Resellers Reference Price Resellers Reference Price Resellers Reference Price Resellers Reference Price Resellers Reference Price Resellers Reference Price 0.83 > Not applicable 2.2 Clause 9 of Schedule One to the Agreement further provides that the Resellers Reference Price for distributors and reticulators is R20,50 per Gigajoule for the year 2000 and will escalate once per annum on 1 January

3 of each year, commencing on 1 January 2001, as follows: (a) 50% with the Production Price Index (PPI) as published by Statistics South Africa (Table 1.1 for consumption of all groups in South Africa). (b) 50% with monthly average price of the daily mean of high and low high sulphur fuel oil (HSFO) 180 centi Stokes (cst) as quoted on the Singapore spot market and reported by Platts Global Alert. 2.3 The period for the Reseller s reference price escalation was changed from 01 January to 01 March of each year effective from 01 March Maximum Prices to Greenfields Customers 2.4 In terms of Clause 10 of Schedule One to the Agreement, Sasol will negotiate the price of gas with Greenfields Customers on an individual basis, but subject to the maximum price levels shown in the following table: Table 2: Maximum price levels for Greenfields Customers QUANTITY GAS PURCHASED 3 5 million Gigajoules per annum 5 8 million Gigajoules per annum More than 8 million Gigajoules per annum PRICE Greenfields Reference Price Greenfields Reference Price less 5% Customer may choose between securing Own gas supply or Greenfields Reference Price less 7,5% 2.5 Clause 10 of Schedule One to the Agreement further provides that the Greenfields Reference price for the year 2000 is R23.11 per Gigajoule. This price will escalate annually on 1 September of each year, commencing on 1

4 September 2001, as follows: (a) 50% with the Production Price Index (PPI) as published by Statistics South Africa (Table 1.1 for consumption of all groups in South Africa). (b) 35% with monthly average price of the daily mean of high and low high sulphur fuel oil (HSFO) 180 centi Stokes (cst) as quoted on the Singapore spot market and reported by Platts Global Alert. (c) 15% with SEIFSA Steel (all types) Price Index, Table E, as published by the SEIFSA Economic Division. Minimum prices to customers 2.6 In terms of Clause 14.4 of Schedule One of the Agreement, from First Gas, no gas user purchasing gas shall pay less than the Landed Price at Secunda, plus the cost of delivery from Secunda to that user. 2.7 Sasol Gas Ltd indicated that its systems are not appropriately set up to estimate the delivery cost to customers. 2.8 The Minimum prices to customers were calculated as follows: Minimum prices = (Well head) + CPF x Exchange rate + Transport tariff (from Maputo to Secunda) 3. Analysis Maximum prices for Distributors and Reticulators 3.1 The actual price charged to Egoli Gas by Sasol Gas is used as a reference price to calculate the maximum prices for all distributors and reticulators. 3.2 Should Sasol at any time grant such Reseller a more favourable price or

5 price adjustment formula than the one set out above, then such more favourable price or price adjustment formula shall, from the date that is applicable to such Reseller, replace the above price and/or price adjustment formula. 3.3 Table 4 below provides the calculated resellers reference price for the period 01 March 2008 to 28 February 2009 compared to 01 March 2007 to 28 February 2008 period. Table 4: Calculation of Reseller s Reference Price Period Effective Date Reseller s Reference Price (RRP) 01 Mar 2007 to 28 Feb Mar 2007 R Mar 2008 to 28 Feb Mar 2008 R The increase in the resellers reference prices by % (from R to R R59.31) this mostly due to changes in the exchange rate, as well as increases in the price of High Sulphur Fuel Oil. 3.5 The above reference prices were used to calculate the maximum prices that Sasol Limited was allowed to charge distributors and reticulators in table below: Table 5: Maximum prices per volume category for distributors and reticulators for the period 01 April 2008 to 31 March 2009 VOLUME CATEGORY (GJ/a) Resellers reference price (2009) Maximum price (R/GJ) R x 1.5 R R x 1.25 R R x 1.10 R R R R x 0.9 R R x 0.88 R R x 0.83 R 49.23

6 > N/A Maximum prices for Greenfields Customers 3.6 Table 6 below provides the calculated Greenfields reference price for period 01 September 2007 to 31 August 2008 and 01 September 2008 to 31 August Table 6: Reference price for Greenfields Customers Effective Date Greenfields Reference Price (R/GJ) 01 September 2007 to 31 August September 2008 to 31 August The following should be noted from the above table: (a) The Greenfield reference price has increased by 32% (R37.72 to R49.98) between the period 01 September 2007 to 31 August 2008 and 01 September 2008 to 31 August (b) The increase in the Greenfields reference price in 2009 is mostly due to changes in the exchange rate, increases in the price of HSFO, as well as increases in the SEIFSA price index. 3.8 The Energy Regulator used the above reference prices to calculate the maximum prices that Sasol Gas is allowed to charge its Greenfields customers in Table 7 below: Table 7: Maximum price for Greenfields Customers per volume category for the period 01 September 2008 to 31 August 2009 EFFECTIVE DATE 1 September 2007 VOLUME CATEGORY (GJ p.a ) REFERENCE PRICE 3 5 million Gigajoules per annum R MAXIMUM PRICE (R/GJ)

7 to 31 August 2008 Minimum prices 5 8 million Gigajoules per annum More than 8 million Gigajoules per annum R49.98 less 5% Customer may choose between securing own gas supply or R47.60 less 7,5% The Energy Regulator has determined the following minimum Piped-gas prices for the period 1 April 2008 to 31 March 2009 Table 8: Minimum prices to customers for the period 01 April 2008 to 31 March 2009 Purchase Price for Natural Gas $/GJ R/$ Exchange Rate Monthly Average Purchase Price for Natural Gas R/GJ Transport R/GJ Natural Gas landed cost at Secunda R/GJ 1 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Average for year (R/GJ) Decision Making Process On 21 April 2010 the Energy Regulator approved the determined maximum and minimum piped-gas prices for the periods 01 March 2008 to 28 February Conclusion

8 5.1 The Energy Regulator concluded that notice should be given to invite interested parties to submit written presentations regarding the following; (i) maximum prices for distributors and reticulators for 2008/09 financial year; (ii) maximum prices for Greenfields customers for 2008/09 financial year; and (iii) minimum prices for gas customers from April 2008 to March In particular interested parties are requested to compare these preliminary maximum prices to actual piped gas prices and provide any information to the Energy Regulator that it should take into consideration in making this determination.

9 GLOSSARY OF TERMS PIPED-GAS Agreement Means the Schedule One to the Agreement Concerning the Mozambican Gas Pipeline between the Government of the Republic of South Africa and Sasol Limited signed on 26 September Coal bed Methane A form of natural gas extracted from coal beds, is similar to natural gas in that its main constituent is methane. Consumer Means a person who uses gas except for those persons who purchase gas from a reticulator. Compressed Natural Gas Is a substitute for gasoline (petrol), diesel, or propane fuel. It is considered to be a more environmentally "clean" alternative to those fuels and it is much safer than other motor fuels in the event of a fuel spill: natural gas is lighter than air, so it disperses quickly when leaked or spilled. Distribution Means the distribution of bulk gas supplies and the transportation thereof by pipelines with a general operating pressure of more than 2 bar gauge and less than 15 bar gauge or by pipelines with such other operating pressure as the Gas Operator may permit according to criteria prescribed by regulation to points of ultimate consumption and reticulation systems, or both points of ultimate consumption and reticulation systems and any other activity incidental thereto, and distribute and distributing have corresponding meanings. First Gas Means the date upon which natural gas from Mozambique is first sold and delivered on a commercial scale and a continuous basis to pipeline customers in South Africa, i.e. 26 March 2004.

10 Gas Means all hydrocarbon gases transported by pipeline, including natural gas, artificial gas, hydrogen rich gas, methane rich gas, synthetic gas, coal bed methane gas, liquefied natural gas, compressed natural gas, re-gasified liquefied natural gas, liquefied petroleum gas or any combination thereof. Gas Regulator Means the Gas Regulator as contemplated in the Gas Act (Act No. 48 of 2004) and replaced by the Energy Regulator as contemplated in the National Energy Regulator Act No. 48 of Gigajoules (GJ) A metric term used for measuring energy use. 1(one) GJ is equivalent to the amount of energy available from 26.1 m 3 of natural gas. Greenfield s Means an external customer who, after the date of signature of this Agreement, constructs a facility on a new site and which facility receives piped-gas from Sasol for the first time at or after first gas Greenfield s Reference price Means the reference price for Greenfield s customers Hydrogen Rich Gas Is a colourless, odourless, non-metallic, tasteless, highly flammable diatomic gas with the molecular formula Landed Price at Secunda Means the average price per Gigajoule of the 120 million Gigajoules per annum of gas for the project delivered to Secunda Licensee Means a person holding a license granted by the Energy Regulator in terms of the Act. Liquefied Natural Gas Is a natural gas that has been converted to liquid form for ease of storage or transport.

11 Liquefied Petroleum Gas A mixture of hydrocarbon gases used as a fuel in heating appliances and vehicles. Methane Rich Gas A manufactured gas produced at Sasol s coal to liquids Secunda plant and has a lower methane content and calorific value than natural gas. Natural Gas Means a gaseous fossil fuel consisting primarily of methane but including significant quantities of ethane, propane, butane, and pentane heavier hydrocarbons removed prior to use as a consumer fuel as well as carbon dioxide, nitrogen, helium and hydrogen sulphide. Natref Means National Petroleum Refiners of South Africa (Pty) Ltd Price Means the charge for gas to a trader, reticulator or final customer. Price Cap Mechanism Means a limit on Sasol s average revenues from gas sales compared to a European benchmark. Regulation Means a regulation made under section 34 (1) of the Gas Act. Resellers Reference Price Means the reference price for distributors and reticulators Residential Means household use of gas. Site Means a separate area of land with its buildings owned or rented by a gas consumer. Small Customer Means customers consuming less than Gigajoules per annum of gas per site.

12 Subsidiary Means a subsidiary as defined in the Companies Act, 1973 (Act 61 of 1973). Synthetic Gas A gas mixture that contains varying amounts of carbon monoxide and hydrogen generated by the gasification of a carbon-containing fuel to a gaseous product with a heating value. Year Means any sequential period of 12 months with the first year measured from the first day of the month in which First Gas occurred.