What awaits consumers in looming cooking gas regulations

Kenyans will lose freedom of visiting any petrol station and buying cooking gas without regard to the brand of gas cylinder they hold with new Liquefied Petroleum Gas (LPG) regulations set to come into effect.

The Energy Regulation Commission (ERC) said it has finalised the new regulations, which will abolish the LPG gas cylinder exchange pool created nine years ago with the aim of easing access to fuel.

ERC Director General Pavel Oimeke said they had finalised working on the regulations and forwarded them to the Attorney General for “review and gazetting”.

The commission expects the new rules to come into force in coming weeks.

“We are doing away with the cylinder exchange pool and introducing a mutual exchange pool. This will mean companies or people with similar business ethics can come together and form a pool to exchange cylinders,” said Mr Oimeke.

It will be a victory for oil marketing companies that have in the past complained that the pool has resulted in their losing control of their cylinders as well as a surge in illegal refilling, something that has deterred investments into the industry.

While the marketers get their wish of getting the exchange pool disbanded, they will have a heavier responsibility of ensuring the cylinders bearing their brands are safe. There are stringent conditions on the cylinder, something that has been contested and was even subject of a court case.

The new rules will also affect your neighbourhood LPG outlets that grew over the last decade due to the liberal nature of the 2009 regulations, which allowed them to refill their stock at any depot.

With the new rules, the retailers will have the tedious job of moving from one depot to another to ensure they have a variety of brands in their stocks.

Industry experts however say while the new rules will inconvenience consumers, they will increase safety as the marketers will now be held responsible for the safety of the gas cylinders.

The owners of the brand will be required to frequently revalidate the gas cylinders.

Oimeke added that the new regulations have cleared the air on the ownership of the gas cylinder.

“Consumers are at liberty to go to a brand and get their money back and go to one that they are comfortable with. They will not be stuck with a cylinder they do not want, you will get your cash back.”

Ownership

The issue has been subject to a court case, where some oil marketers felt that the consumer should assume ownership of the equipment.

ERC however said the cylinders belong to the marketers, who would be held to account in case of incidents such as explosions in homes.

“We have made it clear that the cylinder belongs to the brand owner… currently, the regulations are not clear on ownership. If it causes an accident, liability will be with the brand owner,” said Oimeke.

“As a consumer, you are always changing the cylinders so you cannot be held responsible for ensuring the cylinder is safe.”

The Ministry of Energy towards end of 2017 formed a committee to review the LPG Regulations of 2009 that heralded the unified valve and the exchange pool, enabling consumers to buy gas from any marketer and even retailers next door irrespective of the brand.

The committee recommended doing away with the exchange pool.

Oil companies have in the past argued that the ‘liberalised’ LPG regime has led to the proliferation of illegal gas refilling business. Although this was an unintended development, they said the policy needed to respond to the reality on the ground.

Other than illegal refilling, other issues that did not sit comfortably with the marketers included competitors receiving cylinders from consumers but taking what was seen as unnecessarily long to take the cylinders to the brand owners.

Some of them were even reported missing, fuelling mistrust among the competitors.

At some point, the marketers owed each other more than Sh500 million for cylinders received from customers but not delivered to the owners.

The regulations have tried to resolve the issue and note that those debts will remain even after the disbanding of the pool, and companies will have to clear them or risk having their licences not renewed.

Hass Petroleum Chief Operating Officer Solomon Osundwa said that while the exchange pool was a good idea especially for consumers, there was lack of modalities to clamp down on illegal refilling as well as ensuring minimal debts among the competitors.

“Whatever regulations that are there, they must be enforced. If we have the exchange pool and action is taken against illegal refilling, it would have worked. If the pool was in such a way that everybody who participated got some form of guarantee or performance bond to deal with debt, the exchange pool would have worked,” he said.

“Better enforcement is important… we may change the rules and scrap the exchange pool but if illegal refilling continues then we will not meet the objectives.”

Industry analyst Linus Gitonga said that while consumers would lose the convenience of buying cooking gas at any petrol station, the regulations ensure that the cylinders are safer.

He also said the huge penalties in the regulations are expected to increase compliance levels and achieve a more orderly market. The flipside is that they might lock out new entrants from the market.

“Marketers retain cylinder ownership and by extension safeguard their market share. They will also have responsibility of cylinder revalidation, which makes it easier for authorities to regulate compliance,” said Mr Gitonga.

“There is however need to rethink the notion that safety can only be achieved if marketers retain ownership of the cylinders. The absence of an exchange pool will create barriers of entry for new players to the market.”

He added that industry players need to keep innovating to improve the sector’s operations, including the usage of LPG among Kenyans as well as attract more investors in the industry.

“There is need to separate cylinder ownership from LPG marketers in future. This will give room to leasing companies who may wish to venture into cylinder leasing without necessarily engaging in LPG marketing. Such a fully liberalised market has the likelihood of transforming the LPG sector in a big way,” said Gitonga.

The ease of access to gas can be credited to having played a part in its growing use in Kenya, moving from 80,000 tonnes per year in 2010 to 189,300 tonnes in 2017.

But though the amount of LPG consumed locally has more than doubled over the eight years that the rules have been in place, the per capital consumption of gas in Kenya is still low when compared to other countries in Sub-Saharan Africa such as South Africa, Senegal and Botswana.