JUDMENT Shahid Karim, J. This litigation presents for review the decision of Oil & Gas Regulatory Authority (OGRA) dated 11.11.2020 which is the determination of Re-Gasified Liquefied Natural Gas (RLNG) Weighted Average Sale Provisional Price ("the Provisional Price") for the month of August 2020 made by OGRA which is in the following terms: "2. In accordance with the Federal Government decision regarding "RLNG Allocation, Pricing and Associated Matters" and advice from Ministry of Energy regarding weighted average sale price dated January 22, 2018, RLNG Weighted Average Sale prices for the month of August, 2020 has been computed as attached at Annexure-A and Annexure -B"
2. Annexure `A' with this document (Annexure `J' of the petition) proffers the basis for computation inter alia of distribution loss in respect of the petitioner Sui Northern Gas Pipelines Ltd. (SNGPL) which has been done at the rate of 6.3% to be the following: "iv. The figure of Retainage & UFG have been taken on provisional basis. The same shall be finalize upon the actual results as per ECC policy guidance, UFG allowed in DERR 2019-20 has been taken on provisional basis as FRR petition for the same year has not yet been submitted by SNGPL."
3. As per the decision set out above of November 11, 2020 by OGRA (the Decision), the computation has been made in accordance with the decision of the Federal Government regarding "RLNG allocation pricing and associated matters and the advice from the Ministry of Energy regarding weighted average sale price dated January 22, 2018.
The computation was initially made for the month of August, 2020 and according to the learned counsel for the petitioner, the basis for computation for the said month has been followed for subsequent months till May, 2021.
Thus, pendente lite the period has stretched to May, 2021 which is in dispute in this petition (period in dispute). In a nub, SNGPL contends that the provisional price should be at 11.94% and not 6.3% as determined by the Decision passed by OGRA. That basis, according to SNGPL, has no pedigree in law nor does it comport with the past practice followed by OGRA for the previous years which will be demonstrated in the proceeding paragraphs.
4. The facts may be stated shortly. By the decision made by the Federal Government on 27.06.2016 (decision of Federal Government) OGRA was conveyed policy guidelines in terms of Section 21 of the OGRA Ordinance, 2002 in respect of the determination of sale price for RLNG. In this petition we are concerned with the determination of sale price for transmission loss and distribution loss in respect of which the decision of Federal Government conveyed the following guidelines to OGRA: "vii. Transmission Loss to be determined and charged at actual subject to a maximum of 0.5% (to be shared by gas companies based on length of T ransmission Line Involved. viii. Distribution Loss to be determined and charged at actual. The said loss for the customers located on high pressure transmission lines as well as those customers who are willing to lay their dedicated line from SMS/T&S at their own cost shall also be determined and charged at actual. However , for other customers on distribution lines, an actual average UFG for the last financial year will taken in determination."
5. From the portion of the decision set out above it is clear that the Federal Government as a matter of policy desired that transmission loss shall be determined and charged at actual subject to the maximum of 0.5% and in respect of the distribution loss it shall also be determined and charged at actual. A crucial aspect of the decision in respect of the distribution loss was the fact that "for other customers on distribution lines, an actual average UFG for the last financial year will be taken in determination" . Therefore, the Federal Government conveyed a clear set of guidelines to OGRA for the determination of both the transmission loss as well as distribution loss which was to be determined and charged at actual. Over the years OGRA has been compelled to make a provisional determination of price for certain months of a financial year in view of the fact that audited accounts for the last financial year have not been finalized and pending their finalization, OGRA makes a provisional determination of price. This determination has been characterized as "computation of RLNG provisional price".
SNGPL contends that based on the guidelines issued by the Federal Government, the estimated revenue requirement for a certain financial year was made the benchmark to determine the distribution loss till the time the audited accounts were finalized. For example, the final revenue requirement for the financial year 2015-16 was determined on November 25, 2016. Accordingly from November , 2016 to June, 2017, the distribution loss was determined on the basis of the final revenue requirement at the rate of 9.21%. Once again from July, 2017 to October , 2017 the distribution loss was determined by taking into account the final revenue requirement for the financial year 2015-16 at the rate of 9.21% . In the same manner the final revenue requirement for the financial year 2016-17 was determined on October 6, 2017 and accordingly for the period July 2018 to February 2019 the final revenue requirement for the previous financial year 2016-17 was used as a goalpost to determine the distribution loss at the rate of 8.07%. This criteria was applied consistently by OGRA till June 2020 and the benchmark for the provisional price determination was the final revenue requirement for the last financial year. This consistent pattern was in accord with not only the decisio n made by the Federal Government but also met the standards for determination of distribution loss set by OGRA itself. It is reiterated that the parties do not quarrel with regard to the determination of distribution loss to be finally determined which has to be determined at actual. The dispute merely relates to the provisional price determination for the transient months for which the audited accounts have not been finalized and there is a grey area during which OGRA is called upon to determine the provisional price.
6. Therefore, the case of SNGPL is that a sudden departure from past practice offends the rights of SNGPL to be treated in accordance with law and violates the rule of law on which the determination of distribution loss has to be premised. There is no cavil and it has also been demonstrated by filing of documen ts and other material by SNGPL through C.M No.5 of 2021 that OGRA has consistently followed a practice in the past while making computation of RLNG provisional price. These documents are official documents issued by OGRA and are undisputed. Doubtless, these documents clearly demonstrate a consistent and clear pattern of decision-making on the part of OGRA since the year 2016 which was deviated for the month of August, 2020 onwards which gave rise to a cause of action for the present petition.
7. The learned counsel for OGRA controverts by referring to a study got conducted by an accounting firm KPMG which concluded that the provisional revenue requirement of distribution loss should be the same as distribution loss determined in respect of natural gas. According to OGRA, KPMG suggested in the study that there be a consistent policy for such determination of natural gas and RLNG. However , this argument cannot prosper . Firstly , any study conducted by a private accounting firm is an internal document and cannot upend the policy guidelines issued by the Federal Government and the consistent past decision-making on the part of OGRA. As adumbrated, OGRA has demonstrated a clear pattern on the basis of standard fixed by itself and which was made the yardstick for computation of RLNG provisional price. It would be unreasonable and irrational on the part of OGRA now to deviate from that practice to the detriment of SNGPL. Apart from offending the rule of fairness in respect of such matters, the Decision made by OGRA entails enormous financial burden to be borne by SNGPL as the sudden change in criteria and standard of decision-making by OGRA has subjected SNGPL to a number of detriments. The reason put forth by OGRA in making the deviation does not amount to a rational basis to justify the action.
Therefore, the act of OGRA in the determination of provisional price for the month of August, 2020 till May, 2021 is unlawful and without any reasonable basis.
8. The primary reason this Court is inclined to judicially review OGRA decision is to prevent administrative arbitrariness. The purpose is to protect SNGPL against injustice on account of unnecessary and uncontrolled discretionary power . I intend to underscore the basic notions of fairness in administrative law such as the need for consistent explanations, for explanations of changes in policy , for an agency to follow its own rules, for prospectivity when changing policies etc. Kenneth Culp Davis in Administrative Law Treatise, Vol. 1 208-209 (2nd ed. 1978) emphasized the need for administrative safeguards (as distinguished from statut ory safeguards) in the following words: "The crucial consideration is not what the statute says but what the administrators do. The safeguards that count are the ones the administrators use, not the ones mentioned in the statute. The standards that matter are the ones that guide the administrative determination, not merely the one's stated by the legislative body. The test should accordingly be administrative safeguards and standards, not statutory safeguards and standards."
9. Thus in order to achieve the goal of nonarbitary agency decision making, agencies must supply the standards that discipline their discretion. The rule requires decisional consistency to safeguard expectation. Professor Kenneth Culp Davis, in the same treatise, pointed out that: "The dominant law clearly is that an agency must either follow its own precedents or explain why it departs from them. "
10. The above statement was relied upon by the U.S Supreme Court in Atchison, Topeka & Santa Fe Railway Co. v W ichita Board of T rade, 412 U.S 800, 808-809 which stated that: "duty to explain its departure from prior norms. The agency may flatly repudiate those norms, deciding, for example, that changed circumstances mean that they are no longer required in order to effectuate congressional policy . Or it may narrow the zone in which some rule will be applied, because it appears that a more discriminating invocation of the rule will best serve congressional policy . Or it may find that, although the rule in general serves useful purposes, peculiarities of the case before it suggest that the rule not be applied in that case. Whatever the ground for departure from prior norms, however , it must be clearly set forth so that the reviewing court may understand the basis of the agency's action and so may judge the consistency of that action with the agency's mandate...
(If) the agency distinguishes earlier cases, [it must] assert [] distinctions that, when fairly and sympathetically read in the context of the entire opinion of the agency , reveal the policies it is pursuing. "
11. The rule, generally, regarding decisional consistency has been culled out in a respected treatise titled Administrative Law and Regulatory Policy, Problems, Text and Cases by Stephen G. Breyer, Richard B.
Stewart, Cass R. Sunstein Adrian Vermeule and Michael E. Herz (seventh ed.): "Consider the various ways in which agencies might adopt and then change their policies, and the potential responses by courts to claims that any such changes were arbitrary or unfair because they destroyed important exception interests.
First, an agency may adopt a policy through adjudication and then adopt and enforce a change in that policy in a second adjudication. Courts in some limited circumstances invalidate such changes as arbitrary , as we will see in Section E.1.a below , but the general rule is that an agency , like a common law court, may change its policies through adjudication if those policies were originally made via adjudication. In Section E.1.b, we consider whether such a change might be impermissibly retroactive; in Section E.1.c, we consider when principles of res judicata prevent an agency from revisiting a prior adjudicatory decision.
Second, an agency might initially adopt a policy through rulemaking and then adopt and enforce a change in that rule through adjudication. Arizona Grocery holds that such changes are per se invalid. (What is the justification for such a sharp distinction in judicial treatment of adjudication-adjudication changes and rulemaking-adjudication changes?)
Third, an agency might initially adopt a policy through an adjudication and then change it through a rulemaking.
That scenario is unproblematic.
Finally , an agency may adopt a policy through rulemaking and then change that policy through a second rulemaking. Should courts ever restric t an agency's change of policy by this route? In part, that was the issue in State Farm and Fox, which addressed the problem of what sort of explanation was required for such a change. In Section E.2, we address a different aspect of that question: whether agencies can write retroactive rules."
12. There is no doubt that OGRA is a core public authority . Many of its functions do not have a specific statutory source but many of these functions are carried out as "self-regulatory body with no visible means of legal support".
(R.V Panel on Takeovers and Mergers Ex. p. Datafin [1987] 1 Q.B.815 at 824). RLNG price fixation by OGRA is one such function and has its source in a letter dated 27.7.2015 issued by the Federal Government and the subsequent notification SRO 971(I)/2015 published on 30.09.2015.
13. The abuse of powers and their contro l as a normative value of the rule of law doctrine has been referred in De Smith' s Judicial Review (Eighth Edition) in the following terms: "Yet, the courts recognize that it is important to the rule of law that the abuse of those powers be controlled irrespective of their source and that the nature of the control should be the same as the control of more conventional administrative powers conferred by statute. Accordingly, the foundation for judicial review should no longer be regarded as ultra vires. In general, therefore, in a claim for judicial review it is no longer of any significance whether the source of alleged invalidity of administrative action is based upon an excess of jurisdiction or error of law within jurisdiction. Nor does it matter whether the error is or is not an error disclosed on the face of the record."
14. There is no doubt in my mind that the Decision is pre-eminently a field in which the courts should defer to the decisions taken by a specialized authority having the institutional capacity to do so. Further, the Decision is polycentric and involves the allocation of public resources and is in the realm of OGRA. This Court is only concerned with the process review of the Decision and the manner of the exercise of a public power. It was said by A. Barak, "Foreword: A Judge on Judging: The Role of a Supreme Court in a Democracy" (2002) Harv L.R.16, 97-106, that: "...The courts display reserve in impinging upon the substance of policy decisions, but even here they may legitimately intervene if the decision is devoid of reason and not properly justified... "
15. The past criteria prescribed by OGRA engendered legitimate expectation in favour of SNGPL. In the words of De Smith: "When a public authority openly prescribes the criteria upon which it proposes to decide may thereby create a legitimate expectation create an interest that if fairness should be given some procedural, or even substantive, protection ..."
16. The first attempt at a comprehensive definition of the principle of legitimate expectation was provided by the House of Lords in Council of Civil Service Unions v Minister for the Civil Service (the GCHQ case) [1985] A.C 374. Lord Fraser indicated the two ways in which a legitimate expectation may arise: "either from an express promise given on behalf of a public authority or from the existence of a regular practice which the claimant can reasonably expect to continue." (at 401B)
17. The present may be deemed to fall in the latter of the two categories of legitimate expectation as there was a "regular practice which the claimant can reasonably expect to continue". This may also be termed as implied representation to which the following statement is found in De Smith : "The promise or representation on which the expectation is based may be implied, e.g. from past conduct or a practice which the claimant may reasona bly expect will be continued as in another tax case where the court of Appeal held that the Revenue could not resile from a long practice of accepting a claim for a tax refund despite the fact that the statutory time limit had expired.
"If a representation is made generally, directed to the world at large, this normally means that a public body has adopted a policy. However, policies can also be directed at a class, for example, those who chose to read published decisions of the Revenue about extra-statutory concessions. However, to benefit from an extra- statutory concession, it is necessary for the claimant to have a case "falling clearly within" the terms of the concession."
18. The regular past practice of OGRA was to adopt a certain benchmark for deter mination of the provisional price.
It was a practice directed at SNGPL personally and remained operative until changed by OGRA suddenly and without notification of its intent to do so. This provides the basis for legitimate expectation to SNGPL that the settled practice be implemented and not departed from. The past practice of OGRA to decide the matter of provisional price in a particular manner was an expectation which qualified as legitimate. It was clear, unambiguous and made by a person with actual authority. If that past practice had to be abandoned or changed, it could only be done after prior notice and hearing. The policy was adopted by adjudication and any change in second adjudication cannot be arbitrary nor can it be retroactive. The revisiting of past practice must conform to rules of fairness and legitimate expectation. The sudden volte face by OGRA impacted SNGPL enormously financially and had a spiral effect on the consumers generally. To the same effect is a statement found in Administrative Law by H.W.R. Wade & C.F. Forsyth (Tenth Edition): "A case of `established practice' was where civil servants employed in secret work in the government communications headquarters were prohibited from belonging to trade unions. Since there was a well-established practice of consultation in such matters, but no consultation had been offered, the House of Lords held that the procedure would have been unfair and unlawful had there not been overriding considerations of national security .
For the same reason a local education authority acted unlawfully in proceeding with a school reorganization without adequately consulting parents, since this was habitually done in such cases under the emphatic advice of the Secretary of State. In `a classic example of legitimate expectation' the court quashed the government's and British Coal's decision to close a large number of collie ries in disregard of the established colliery review procedure and without consulting the miners and trade unions affected. It was held that only a substantially similar review procedure, including some form of independent scrutiny , would satisfy the expectations legitimately held."
19. In conclusion, this petition is allowed. The Decision of 11.11.2020 is null and without lawful authority .
Consequently , OGRA shall determine the UFG for consumers on RLNG distribution network at actual average UFG of last financial year and policy Guidelines dated 27.6.2016 issued by the Federal Government for the period in dispute.