ERC rejects dealers' bid to quit uniform gas valves pool

NAIROBI, KENYA: An attempt by oil marketing companies to phase out the unified valves for cooking gas cylinders has hit a brick wall. The companies had written to the Energy Ministry asking to return to a previous regime, where the valves were unique to each oil marketer.

This had the effect of locking down customers to specific liquified petroleum gas (LPG) brands, but the oil firms say it could help eliminate illegal refilling of cooking gas. The Energy Regulatory Commission (ERC) has, however, rebuffed the proposal, saying the move is ill advised, costly and compromises consumer safety standards. The marketers had argued that this would help clamp down illegal refilling of LPG.

It would have also helped them protect their market share, which is being eaten into, as more players join the lucrative business of selling cooking gas. New players gnawing into a market that was previously the forte of oil firms has made the latter uncomfortable, given that LPG has been a key profit area, especially after the ERC started capping the retail price of super petrol, diesel and kerosene.

Retrogressive decision

According to the regulator, changing to unique valves, which wereabolished eight years ago, would be “retrogressive” and “unacceptable”. ERC Director of Petroleum Linus Gitonga said the decision to go for unified valve was arrived at after consultation between the industry players, government, consumers and general public.

“Changing to unique valves will be retrogressive and unacceptable. Both the marketers and us as the commission exist because consumers do. Consumers’ interest supercedes any other commercial interest,” said Eng Gitonga.

According to ERC, the decision to switch to unified valves was advised by the need to mitigate against safety issues that were associated with use of different regulators at home, and give flexibility to consumers in terms of brand choice.

“It was noted then that several accidents had been reported associated with mix-up when using regulators with the right cylinder. This used to result in leaks and exposed LPG users. The ultimate objective was to increase LPG access,” said Gitonga.

Gitonga reckons that reverting to the old system of unique valves would be costly to consumers and reduces accessibility to cooking gas by hooking consumers to particular marketers, whether they like it or not.

“Should the marketers request be granted, which I doubt the Government will, it means consumers will have to buy several regulators to enjoy the same flexibility and choice they do today,” Gitonga told Business Beat, adding that one regulator costs about Sh1,000.

The market have in the recent past argued that the unified valve has had the effect of growing the problem of illegal refilling. The Petroleum Institute of East Africa (PIEA) says the illegal cooking gas accounts for about 70 per cent of the market, with the legal players being squeezed, despite their heavy investment in plants and gas cylinders, as the illegal players raked in billions.

Unique valves

“The LPG market is shaky and that is why you see large investors walking away,” said PIEA chairman Polycarp Igathe. ERC admits the rise in illegal refiling of gas but noted that it would persist even with the unique valves in place.

“You may wish to note that not all marketers are for the idea of changing to unique valve. Those who are pushing for unique valve argue that this will solve the issue of illegal refilling and cross filling. It is worth noting that this problem existed long before introduction of unified valve.”

“Illegal refilling is a problem, which the commission has committed to resolve completely including demolishing unlicensed plants and control of LPG prices, which are also encouraging this vice.”

Already, he says two facilities have been demolished and two have been sealed awaiting court decision. “Other unlicensed facilities will be dealt with as soon as the judiciary okay us. In the meantime, the facilities are not operational and will continue monitoring them,” he says.

Wanjiku Manyara general manager PIEA said the institution, which is a lobby for oil marketing companies in the country, is alarmed by the rising cases of LPG malpractice.