British Gas faces price curbs

Click to follow
British Gas is today bracing itself for a tough price clampdown as the Government publishes the long-awaited Monopolies and Mergers Commission report on the charges its pipeline division TransCo is allowed to levy.

Unions were last night called to a meeting at BG's headquarters to be briefed on the outcome of the MMC investigation, which was prompted after the company rejected price cuts worth pounds 28 a year for domestic customers proposed by the industry regulator Clare Spottiswoode.

BG has warned that the reduction in revenues set out under the new price formula could mean 10,000 job losses from TransCo's 20,000 strong workforce and cut its cash flow by pounds 400m a year.

Details of the MMC's findings have been kept under tight wraps since its report was delivered to BG and Ofgas a fortnight ago. But the MMC is thought to have broadly backed the regulator's approach in a move which City analysts believe could still result in a reduction in bills of close to pounds 20.

BG described Ms Spottiswoode's original proposals as the "biggest smash and grab raid" in corporate history and "seizure of shareholders' funds on an unprecedented scale". The company has been in dispute with Ofgas over the value of the assets on which it can earn a return, the amount of depreciation it can charge and the amount of operating expenditure it should be allowed.

Separately yesterday it emerged that the next trial of domestic gas competition, involving 2 million homes in Scotland and the North East of England, is likely to be pushed back from October to mid-November. Ms Spottiswoode will meet independent gas suppliers in the Ofgas Domestic Competition Focus Group on Monday to tell them Transco cannot build new computer systems in time to meet the original timetable.

Ian Lang, the former President of the Board of Trade, had announced the October plan shortly before the election, moving the original target date forward from 1998. John Battle, the new industry minister, has told Ofgas he wants to stick to the October timetable but is prepared to accept a short delay to avoid damaging customer service. The regulator has apparently accepted Transco's argument, given the short time remaining for industry- wide consultation.