British Gas set to press ahead with price cuts

The gas watchdog, Ofgas, looks set to give British Gas the green light next week to press ahead with controversial selective price cuts which will see 1 million low-income households largely excluded from reductions. Clare Spottiswoode, the regulator, is thought to be keen to reach a conclusion on the price package before British Gas plans to implement the cuts on 12 January. Ofgas will give its provisional ruling on the price cuts before Christmas, though the document is unlikely to appear until next week.

Centrica, the demerged British Gas supply business, has proposed cuts of around 9 per cent, worth to pounds 28 off the average bill, for 16 million homes which pay by direct debit or settle their accounts promptly. The reductions are the result of drop in transportation charges paid to Transco, the pipeline network. However the proposals would see charges frozen for 1 million homes which use prepayment meters, with very small reductions for a further two million low income households. British Gas said it would wait for the outcome of the Ofgas probe into prepayment meter charges, but is understood to have asked the regulator to widen the price gap with direct debit customers.

Next week's consultation paper will clear the main prices cuts to most homes and is expected to endorse British Gas's claim that prepayment meters cost much more to run. The decision would face strong criticism from the Gas Consumers' Council (GCC), which has lobbied to reduce the disparity between different types of customer. John Battle, the industry minister, has also made clear the government's concern that domestic energy competition should not lead to an increase in "fuel poverty".

It also emerged yesterday that the GCC has complained to Ofgas about new concerns over domestic competition trials in Scotland and the North- east of England.

The GCC said it had received 963 complaints from customers who had switched from British Gas to new suppliers, of which almost 400 involved Eastern, one of the largest independent gas companies. The GCC said some homes had asked to cancel contracts, but had been moved to new suppliers against their will.