British Gas pounds 50 call-out angers rivals

British Gas has become embroiled in a new row with rival suppliers, this time over the costs of administering pre-payment meters in poorer households, which the Gas Consumers Council has warned could threaten the success of domestic competition.

Suppliers have been asked by British Gas to pay pounds 50 for each emergency visit it has to make to homes with pre-payment meters, which are managed by TransCo, the company's pipeline division. Managers have become alarmed at the rising cost of administering the system, called Quantum, which is used by 800,000 households in the UK.

Under the system, customers charge up a smart-card with gas units at Post Offices instead of feeding coins into meters. Last year Quantum homes were responsible for 124,000 emergency call-outs, many of which are claimed to have been unnecessary. The new charge could net British Gas more than pounds 5m a year in extra revenue.

"There are some people with pre-payment meters who think they can get some extra gas by calling TransCo out. We have to run an emergency service which is cost-effective," said a TransCo spokeswoman.

However, new gas suppliers stampeding into the competitive residential market claim the call-out fee will wipe out any profit made from pre-payment customers. In trials of domestic competition in the South-west, prices offered for Quantum homes have been around 20 per cent higher than those for ordinary households.

The Gas Consumers Council has warned that the fee would encourage new entrants into the competitive market to "cherry pick" the best customers. The GCC is already concerned about the marketing frenzy under way in the second set of trial areas, where several companies are engaged in doorstep selling campaigns. Competition starts in Avon and Dorset next week and in Kent and Sussex from March.

Under licences issued by Ofgas, the industry regulator, new suppliers have to offer gas to any customer, regardless of income. Sue Slipman, GCC director, explained: "We know that cherry picking is happening and as soon as we get evidence we'll catch these companies out. This is a flagrant breach of licence conditions set by Ofgas."

One independent gas company, Calortex, has already raised concerns with TransCo about the call-out charge. Calortex, a joint venture between Calor and Texaco, has so far signed up 2,200 pre-payment meter customers in the South-west trial, some 80 per cent of all those Quantum households who have switched from British Gas.

Tomorrow the Office of Fair Trading is to hold a private conference with Ofgas and other industry experts to discuss the marketing problem. Ofgas has so far rejected the GCC's call for it to police a mandatory code of practice. The electricity watchdog, Offer, has also agreed to attend the gathering.