Natural Gas Tariff
The need for economic regulation in natural gas is driven by the fact that service providers have monopolistic power and if they are left unregulated they may abuse their powers leading to inefficient provision of services. A monopoly poses a difficult challenge for competition due to the structure of costs and demand appears to make competition unlikely or costly. A monopoly arises when average costs are declining over the range of production that satisfies market demand. This occurs when fixed costs are large relative to variable costs. As a consequence, one firm can supply the total quantity required in the market at lower cost than others, so splitting up the natural monopoly would raise the average cost of production and force customers to pay more.
EWURA carries out economic regulation by establishing rate methodology and reviewing rates and charges after submission by an applicant or when EWURA sees a necessity to do so. To enable an applicant to submit tariff application for review and approval, the Authority has prepared Tariff Application Guidelines, 2009.
EWURA is mandated to review the regulatory economics (tariffs, prices, rates and charges) either when the application is lodged by the Applicant or when the Authority finds it necessary to do so as stipulated in section 17 of the EWURA Act, Cap 414. The procedure for Tariff Application is provided under the EWURA Act, Cap 414. The procedure for Tariff Application is provided under the Tariff Application Guidelines for Electricity and Natural Gas (2017), EWURA (Tariff Application and Rate Setting) Rules 2017 GN 452 .The Petroleum (Natural Gas Pricing) Regulations, 2016 is the tool at the moment that used to guide and develop natural gas prices. On 29th December 2016, EWURA set the natural gas prices for Special Strategic Investments. Approved Orders can be accessed here.