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Economy

Regulator to review gas cylinder exchange model

A petrol attendant arranges LPG cylinders. The exchange pool system requires oil marketers to accept their rivals’ empty cylinders when a customer wants to refill, making it convenient for buyers. PHOTO | FILE
A petrol attendant arranges LPG cylinders. The exchange pool system requires oil marketers to accept their rivals’ empty cylinders when a customer wants to refill, making it convenient for buyers. PHOTO | FILE  

The Energy Regulatory Commission (ERC) is seeking to review the current system where oil marketers accept cylinders from rival brands during refills on a backlog of transfer payment.

ERC acting director for petroleum Edward Kinyua said a technical team was set to recommend changes to the gas cylinder exchange pool that took effect in 2009 and enabled consumers to refill gas at any of the dealers’ stations.

“We are aware of the teething challenges and that’s why the pool is being re-evaluated to make changes where necessary,” said Mr Kinyua.

The exchange pool system requires oil marketers to accept their rivals’ empty cylinders when a customer wants to refill, making it convenient for buyers.

The oil marketers then exchange the cylinders, each taking their brand at their rivals’ depots.

They are, however, obligated to pay a fee to their rival towards covering deposit fee for the gas cylinder the customers exchanged during refilling at the competitor’s station.

But it is now emerging that some oil marketers, especially small ones, are taking long to repay their rivals the deposit fees, creating a backlog of about Sh500 million that the dealers owe each other.

Currently, the deposit fee for a 13-kilogramme cylinder is Sh3,565, excluding the charge of cooking gas, and Sh2,292 for a 6-kg cylinder and is paid by first time gas consumers.

The ERC reviews the deposit fees every three months to match dealers’ costs in acquiring them in the period. KenolKobil chief executive David Ohana said that the delays in deposit payment for gas cylinders had forced most large marketers to shun cylinders from smaller brands.

He insisted that the gas cylinder exchange operation was smooth among top players like Total, KenolKobil (K-gas) and Vivo (Afrigas). Several of KenolKobil stations had been reported to be rejecting rivals’ brands.

“This system is a failure and has to be abolished. If anything, it has encouraged rampant illegal refilling,” said Mr Ohana.

Cooking gas prices in July dipped below Sh2,000 for a 13-kg cylinder following the removal of value added tax (VAT) on the commodity, representing the lowest price levels since 2010.

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 since it’s convenient and clean.

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

Seven out of 10 gas cylinders in the market are illegally refilled posing danger to homes, according to a last year’s report by the Petroleum Institute of East Africa – the oil marketers’ lobby group.

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