British Gas clashes with regulator on competition
Saturday 10 August 1996
Ofgas is pushing to speed up the second phase in the development of the residential gas market, which would extend competition to 1.5 million homes across the South of England, to a new date in January.
Ofgas hopes to publish a consultation paper on the proposals at the end of this month, but has already held talks with TransCo, the British Gas pipeline business.
The move is believed to be popular with Government ministers, who hope to provide crucial voters in the South with cheaper gas bills.
But TransCo wants to spread the process over several months. Instead of an initial "big bang" on 1 April, its preferred option is to introduce competition over a six-month period, taking each postcode area at a time. A spokesman said: "We see the value of some form of phasing over the first half of the year. We are concerned at what might be an over-hasty approach that could put customers off."
The Gas Consumers Council also prefers a step-by-step approach to competition, but such a move would mean many homes would not have the chance of cheaper bills from rival suppliers to British Gas before the general election, which must take place by next May.
The latest dispute comes as British Gas waits for Ofgas to reveal its contentious final price controls for the pipeline business. The company has campaigned ceaselessly against the proposals, which would cut TransCo's revenues next year by between 20 and 28 per cent, reducing average bills by around pounds 30 a year. British Gas said it would have to cut 10,000 jobs to fund the cuts, which it has described as the "the biggest smash and grab raid in history".
The head of Ofgas, Clare Spottiswoode, returns from holiday on Monday to face a meeting with British Gas as the company makes one final attempt to get her to water down the proposals. Publication of the final formula has already been delayed until "mid-August", though one industry source suggested they could be delayed beyond next week.
To prepare for domestic competition, TransCo has developed one of the world's largest computer databases to track customers as they leave British Gas Trading, the gas supply arm of British Gas, for rival suppliers. In the first phase, which began in May with 500,000 customers in Devon and Cornwall, around 12 per cent of households switched from British Gas.
However, several problems occurred, including some ex-British Gas customers having hundreds of pounds accidentally debited from their bank accounts when they moved from the company.
The next stage, to extend competition to the whole of the South apart from Greater London, was originally due to take place next April, with the rest of the country included in April 1998. However, Ofgas said yesterday: "The inclination is now to do something earlier in the year." The most likely new date would be 27 January.
Several independent suppliers have said they are keen to start supplying gas in the region sooner. One company, Total Gas, has already begun marketing in Kent and Bristol.
Meanwhile another argument came to a head yesterday between TransCo and independent gas suppliers over the rules governing the way different firms use the pipeline infrastructure.
Suppliers must match the amount of gas they put in the system with the amount of gas used by customers. From next month these forecasts must balance daily, rather than monthly, or the firms could face severe financial penalties.
British Gas's rivals have complained that information from metering systems, which comes via TransCo, is not accurate enough to forecast daily demand. Ofgas said it would announce proposals on the issue on Monday. But yesterday one independent supplier said if the problems were not sorted out before September, it may have to challenge its contracts with TransCo in court.
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