British Gas calls for more price freedom: Chief executive claims balance of advantage lies with customers

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BRITISH GAS has called for more freedom to increase prices and give a better deal to its shareholders following the Government's decision to abolish the company's monopoly over domestic customers by 1998 and to separate its pipeline and trading arms.

Cedric Brown, chief executive of British Gas, said since privatisation gas prices had fallen in real terms by between 21 per cent for households and 25 per cent for business, while profits from the UK gas business had fallen.

Although dividends had risen steadily, the balance of advantage lay clearly with the customers and the time had come for a shift towards shareholders.

Speaking at a conference in London on gas, Mr Brown said the company's situation had changed 'out of all recognition' in recent months.

Competitors, including North Sea producers and regional electricity companies, now accounted for 39 per cent of the market above 2,500 therms, where British Gas no longer had a monopoly. The requirement to split the pipeline business and the gas trading arm would make running the company much more costly than before.

These factors meant that the price control keeping increases to inflation minus five percentage points was no longer justifiable.

'We need funds to continue offering customers the highest standards of supply, service and safety. It is in nobody's interest for customers to suffer if British Gas is starved of funds,' he said.

The Gas Consumers Council, however, countered that British Gas would save money through its plan to cut 20,000 jobs. There was no case for higher gas bills, it said.

Mr Brown also warned that British Gas would want competitors to help fund research and development carried out by the company.

He said British Gas was happy to commit resources to R&D when it gained most from the resulting innovations. 'But we will now be looking for a solution to ensure that all those suppliers who also benefit from new technologies developed by British Gas do pick up a share of the cost.'

British Gas spent pounds 89m on research and development in 1992. The projects ranged from increasing fuel efficiency to developing gas air-conditioning and gas-powered vehicles.