British Gas opts for MMC inquiry

British Gas is expected this week to seek a reference to the Monopolies and Mergers Commission to settle its long-running row with regulator Ofgas over price controls for its TransCo pipeline business.

The British Gas board meets this week and, barring any last-minute concessions from Ofgas, is expected to refuse to accept the price curbs demanded by the regulator. That refusal will trigger a referral to the MMC.

Ofgas has set a deadline of 7 October for the company to respond to modified proposals, which were published last month. Since then, the company and Ofgas have been locked in talks to see if a compromise can be hatched. However, sources close to those talks say there has been no break in the deadlock.

Ofgas stunned British Gas and the City when its original proposals, published in May, suggested controls that would cut the company's revenues by between pounds 650m and pounds 850m a year.

After three months of intense negotiations, Ofgas finally revised its proposals late last month. Clare Spottiswoode, the head of Ofgas, insisted that the new controls were more lenient. However, British Gas argued that the amendments were largely superficial and that it would still face a cut in revenues of pounds 650m a year.

The company has consistently argued that the price controls were against the best interests of its shareholders. Insiders suggest nothing has changed to alter that view.

The City believes that a reference to the MMC is inevitable. The inquiry could take six months, but institutional investors are thought to have accepted the argument that the referral offers the best chance for a fairer deal.

Ms Spottiswoode has threatened that if British Gas seeks a referral, she will press for a reinstatement of her harsher May proposals. This is being seen as an attempt to intimidate the company and split the board. However, insiders say it has failed and that the board remains united.

Although it would be possible for the MMC to sanction tougher controls, this is thought unlikely as the precedent such a move would set would create great uncertainty across the entire regulatory regime.

The MMC has also said in the past that it wants to be consistent in its rulings. That has encouraged British Gas, since an MMC ruling in 1993 on the value of its assets would be overturned if the MMC backs the Ofgas proposals.

Fears that an MMC inquiry would be disruptive have also been dismissed by British Gas. Its plans to demerge TransCo from its exploration and production operations will not be affected by the MMC investigation, and the process is going ahead as planned.

Although the investigation will take up management time, it will involve a team of only around 20 executives. This will be headed by deputy chairman Philip Rogerson.

The biggest cost to British Gas will be professional fees, which could run into tens of millions. But such sums are not significant in the context of the group's finances, and will be dwarfed by the pounds 350m of cash flow that British Gas will argue should be handed back to it by a watering- down of the Ofgas proposals.

PROMOTED VIDEO
News
The data shows that the number of “unlawfully” large infant classes has doubled in the last 12 months alone
i100Mike Stuchbery, a teacher in Great Yarmouth, said he received abuse
Arts and Entertainment
The starship in Star Wars: The Force Awakens
filmsThe first glimpse of JJ Abrams' new film has been released online
Sport
Rio Ferdinand returns for QPR
sportRio Ferdinand returns from his three-game suspension today
News
The Speaker of the House will takes his turn as guest editor of the Today programme
arts + ents
News
ebooksNow available in paperback
News
people

Watch the spoof Thanksgiving segment filmed for Live!
Sport
Billy Twelvetrees will start for England against Australia tomorrow with Owen Farrell dropping to the bench
rugbyEngland need a victory against Australia today
Arts and Entertainment
The cover of The Guest Cat – expect to see it everywhere
books
Sport
Tyson Fury poses outside the Imperial War Museum in south London ahead of his fight against Dereck Chisora
boxingAll British heavyweight clash gets underway on Saturday night
News
i100 Charity collates series of videos that show acts of kindness to animals
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Austen Lloyd: Company Secretary

Excellent Package: Austen Lloyd: EAST ANGLIA - SENIOR SOLICITOR LEVEL ROLE** -...

Citifocus Ltd: German Speaking Client Specialist

£Attractive Package: Citifocus Ltd: Prestigious asset management house seeks a...

Citifocus Ltd: Performance & Risk Oversight

£Negotiable: Citifocus Ltd: This is a varied role focusing on the firm's mutua...

h2 Recruit Ltd: Sales Director - SaaS (SME/Channel) - £140,000 OTE

£90000 - £140000 per annum + benefits: h2 Recruit Ltd: Are you a high achievin...

Day In a Page

Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

Christmas Appeal

Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

Is it always right to try to prolong life?

Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

What does it take for women to get to the top?

Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

Knitting pretty: British Christmas Jumpers

Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

French chefs campaign against bullying

A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

Just what you need on a New Year hangover...

Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
Cuba set to stage its first US musical in 50 years

Cuba to stage first US musical in 50 years

Claire Allfree finds out if the new production of Rent will hit the right note in Havana
Christmas 2014: 10 best educational toys

Learn and play: 10 best educational toys

Of course you want them to have fun, but even better if they can learn at the same time
Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

Paul Scholes column

I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

Lewis Moody: Lancaster has made all the right calls – now England must deliver

So what must the red-rose do differently? They have to take the points on offer 
Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game