Energy regulator in tight race to overhaul gas cylinder exchange - Daily Nation

Energy regulator in tight race to overhaul gas cylinder exchange

Sunday February 11 2018

A trader displays cooking gas cylinders. FILE PHOTO | NMG

A trader displays cooking gas cylinders. FILE PHOTO | NMG 

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The Energy Regulatory Commission has rekindled efforts to overhaul the current gas cylinder exchange system as mounting debts threaten to drive dealers out of business.

The ERC director-general Pavel Oimeke, said without giving timelines that their technical team was racing against time to come up an exchange system that does not hurt cash flow of businesses.

The review has delayed since 2016 when the ERC formed a technical team to recommend the changes after it emerged that dealers owed each other in excess of Sh500 million through the exchange pool.

Mr Oimeke said the new system – which is designed from models being used by other countries - will be piloted among the key oil marketing companies before national rollout.

“The new system will be an improvement of the current one. But the universal valve will be staying to ensure that once you buy a cylinder you are able to fit it with your burner without any problems,” he said in Mombasa.

Under the current plan, oil marketers accept their rivals’ empty cylinders when a customer wants to refill, making it convenient for buyers. The dealers then exchange the cylinders, each taking their brand at their rivals’ depots.

The marketers are, however, obligated to pay a fee to their rivals to cover deposit fee for the cylinder the customers exchanged during refilling at their station.

But some oil marketers, especially small ones, have been blamed for delays in repaying their rivals the deposit fee. The ERC reviews the deposit fees every three months to match dealers’ costs in acquiring them in the period.

“We have been approached by our licencees on the need to do away with the current framework. This framework has worked well for us although there are operational challenges,” said Mr Oimeke.

Before the switch to use of universal valves in 2009, each dealer had their unique valve, restricting consumers to a certain brand during refills. This arrangement inconvenienced homes located far from their respective dealers.

Cooking gas prices stood at a 17-month peak of Sh2,140 for 13kg cylinders in January, official data shows.

This level was last seen in June 2016 before the Treasury scrapped VAT on gas to cut costs and boost uptake among poor households that rely on dirty kerosene and charcoal for cooking.

Unlike petrol, diesel and kerosene, cooking gas prices are not regulated by the ERC and have been left to market forces.

Gas has become the preferred energy source for households, especially in major towns, due to its convenience and because it is cleaner than other cooking fuel.

Oil marketers have, however, been pushing for more rigorous checks on unlicensed gas operators, whom they accuse of undercutting the market through irregular refilling.

Through the Petroleum Institute of East Africa, the marketers claim that over half of gas cylinders in the market are illegally refilled, posing danger to users.