British Gas in new price row

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British Gas is facing another wave of criticism from rival suppliers over allegations that the company is manipulating the gas market to alleviate is potentially huge losses from its so-called take-or-pay contracts.

Several rival firms are preparing submissions for the industry watchdog, Ofgas, which are likely to claim that the recent increase in gas prices has beenpartly caused by British Gas's activities in the fuel market.

Ofgas is investigating the claims and has asked industry members for their comments. The head of one gas supply firm said yesterday that his submission would insist that the rise in prices went far beyond any normal operation of the market.

"It wasn't just the fact that prices went up - it was the unprecedented severity of the increase," he said. "People are bemused because the fundamentals haven't changed. In theory there should still be a big oversupply of gas."

Gas prices have risen by some 60 per cent since earlier this year. Despite a brief pause over the past few weeks, the latest spot price data suggests they are climbing again.

The price for December delivery is 15.5p a therm, compared with prices of as low as 9p earlier this year. For delivery in the new year the price has shot up to more than 18p a therm.

At least one independent supplier has had to raise the prices it charges to consumers in the trials of domestic competition under way in the South- west and due to start from February in parts of the south of England.

It has emerged that Calortex, the joint venture between Calor and Texaco, put its prices up from the beginning of the month. It means the price cut compared with British Gas's charges has narrowed by around 5 percentage points, though the company claims its tariffs are still up to 20 per cent lower.

Neil Lambert, the firm's joint general manager, said: "The spot price of gas has gone up by 60 per cent since we announced our prices in February."

The increase in spot prices is benefiting British Gas, which is burdened by its pounds 40bn worth of take-or-pay contracts, priced at around 20p a therm. The nearer market prices recover to this level, the lower the company's losses.

One allegation by the independents has been that British Gas has used its huge buying power in the markets through its trading arm, Accord Energy, to keep the spot price of gas artificially high. Another charge is that British Gas has restricted production from its Morecambe Bay field to change the relationship between supply and demand.

A British Gas spokesman denied the allegations.