British Gas 'in battle mode'

The gas regulator, Clare Spottiswoode, this weekend warned British Gas it would be taking "a big risk" if it put its complaint about her controversial pricing review to the Monopolies and Mergers Commission.

Any such move could backfire, she said. "The MMC may well take the view that we have not been tough enough." Ofgas had "bent over backwards" to be generous to British Gas, she added.

The Ofgas director-general also took a swipe at the company's response to the review, accusing it of being irrational and emotional. "We're clearly into battle mode rather than sensible- discussion mode," she said.

British Gas has reacted furiously to Ofgas's plan to force it to cut its prices by 20 to 28 per cent in its huge pipeline business, TransCo. The review sent its shares plunging 22 per cent to 177.5p, amid fears that its profits will be badly dented.

Philip Rogerson, deputy chairman of British Gas, lashed out at Ofgas's decision to change the basis on which it valued TransCo's assets, a key component in deciding how big a return was fair. "Now we've got a regulator saying: 'Whoops, the rules have changed'," he complained.

He said British Gas was highly unlikely to accept the review, in which case it would be referred to the MMC. "We are poles apart," he said. But it was unlikely to take the ultimate step of seeking a judicial review, which would require British Gas to show that Ofgas had not observed due processes or had acted perversely.

Ms Spottiswoode revealed that Dick Giordano, the British Gas chairman, had cancelled a lunch appointment with her on the grounds that he might end up shouting at her.

She, in turn, has written to Mr Giordano, protesting about his official response to her review and asking him to explain how he came to the conclusion that it would lead to up to 10,000 job losses.

Mr Giordano has written to the company's 1.7 million shareholders urging them to protest about the new pricing regime directly to Ms Spottiswoode.

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