British Gas in new row with regulator

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The Independent Online
British Gas was at loggerheads again with the industry regulator Clare Spottiswoode yesterday after claiming she had ignored the Monopolies Commission report into its TransCo pipeline arm by proposing to cap the revenues it could earn.

A spokesman for BG said that in doing so the director general of Ofgas had ridden roughshod over the concept of incentive regulation and had altered the financial outlook for the company in a fundamental way.

The MMC ruled in favour of Ms Spottiswoode last month by recommending a 21 per cent cut in TransCo's pipeline charges - said to be equivalent to a pounds 28 saving on the average annual gas bill of pounds 325.

Part of the agreed price formula would have capped 50 per cent of TransCo's revenues but allowed the other half to vary according to volume and how successful BG was in winning customers.

However, BG said last night that the fine print of proposals from Ofgas detailing how the price control would be implemented, showed that Ms Spottiswoode intended to go back on this and cap 100 per cent of its revenues.

BG does not have the right to take its objections to the MMC but a spokesman said it regretted Ms Spottiswoode's proposal and would be making a full submission to the consultation paper she had issued.

Ofgas said, however, that the volume estimates given to the MMC by BG might have been understated in which case, TransCo could end up earning significantly more revenue than that considered appropriate by the MMC under the 50:50 rule. It was therefore reconsidering the structure of the price control with a view to setting volumes in advance which would be equivalent to a revenue cap price control.