British Gas steps up attack on regulator

British Gas yesterday stepped up its attack on the "draconian" price controls proposed by the industry regulator Clare Spottiswoode, citing evidence from her own advisers to support its claims that the curbs amounted to seizure of shareholders' funds.

In particular, the British Gas camp drew attention to statements by two academics who have advised Ofgas which were said to contradict Ms Spottiswoode's contention that the price curbs on its pipeline business TransCo represented a "fair balance" between interests of shareholders and customers.

The move came as Harry Moulson, managing director of TransCo, met senior officials at the Department of Trade and Industry to protest at the Ofgas proposals and put British Gas's case that they could lead to 10,000 job losses and undermine the safety and reliability of the transportation system.

British Gas contends that the price curbs, which could cut revenue from its pipeline business TransCo by up to pounds 850m, amount to retrospective regulation and effectively allow Ofgas to clawback past depreciation from shareholders and distribute it to consumers.

It argues that by reducing the asset base on which TransCo can earn a return from pounds 18bn to pounds 9bn-pounds 11bn and by cutting depreciation and capital spending allowances, Ofgas has ignored the findings of a Monopolies and Mergers Commission report in 1993 on TransCo's charging regime.

These are key areas of dispute since if British Gas and Ofgas fail to reach agreement then the company will be referred automatically to the MMC at the end of July.

Comment, page 18

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