British Gas launches attack on pipeline watchdog's clampdown

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Industrial Correspondent

British Gas yesterday launched its offensive on an expected clampdown by the regulator, Ofgas, of its core pipeline business, TransCo, making it increasingly likely that the company will end up at the Monopolies and Mergers Commission later this year.

Philip Rogerson, executive director for TransCo, said that the existing controls are too onerous and that, if anything, a relaxation is justified. "I think probably we will end up at the MMC," he said.

Clare Spottiswoode, director general of Ofgas, recently warned that the controls on TransCo - the amount it can charge rivals to use the pipes, will almost certainly become tougher. She also angered British Gas by expressing concern over pounds 2.5bn in cash already generated by the company but not yet needed for investment in renewing the pipeline network.

Ms Spottiswoode said yesterday that an initial proposal on new price controls for TransCo would be issued for consultation in the week beginning 6 May. A second consultation follows towards the end of June. The regulator also said it is considering a more explicit form of capital expenditure monitoring for TransCo than had been done so far.

Mr Rogerson said: "It looks like the third week in July will be the time to put up or shut up. The only issue that matters is the overall return to shareholders."

British Gas said it is in favour of a price cap linked to inflation with some element of profit sharing for those who use the pipes.

Mr Rogerson said that the cap must be lighter than the present limit on price changes of inflation minus five percentage points. "We are saying that RPI is the way to do it. And I think that is where Ofgas is as well.''