British Gas steps up fight on revenue cap

Chris Godsmark

Business Correspondent

British Gas is stepping up its latest battle with Clare Spottiswoode, the industry regulator, over the implementation of big cuts in pipeline charges recommended by the Monopolies & Mergers Commission.

The company last night submitted its formal response to Ms Spottiswoode's proposals, accusing her of going beyond the MMC's report in a move which could cost BG up to pounds 500m in revenues over five years.

BG yesterday refused to rule out calling a judicial review into the changes.

The MMC investigation largely endorsed Ofgas's planned price regime, recommending a cut of pounds 29 in average domestic bills from this year. At issue in the new row is how much benefit BG should gain from fluctuations in the amount of gas running through its pipelines.

With demand for gas rising sharply, BG's earnings would be likely to go up significantly. Ms Spottiswoode has proposed placing a cap on these revenues after concerns that the company's estimates for demand, on which the price controls were based, were too conservative.

The move by BG came as one of the leading gas analysts suggested the company could be on the verge of a pounds 1bn share buyback programme and could raise pounds 100m this year from asset sales. Simon Flowers, from NatWest Securities, also increased his valuation of the company to 280p a share.

Though BG reluctantly accepted the MMC's conclusions, David Varney, the chief executive, has since claimed the revenue cap departed "fundamentally" from the MMC's recommendations. The MMC report recognised the regulator's worries, but proposed capping only half the revenues.

The company's response will reiterate its view that Ms Spottiswoode should accept the MMC's conclusions "in their entirety". It is also likely to fuel the row by expressing BG's "disappointment" over the way the licence changes have been handled. The company will argue that a cap on all its revenues would mean it would face extra costs from the increases in demand, but would receive no more income.

Ofgas, the watchdog, is likely to announce the licence modifications next month.

A BG spokeswoman said the company was still working to seek implementation of the MMC's recommendations. "We would review the situation only if the need arose," she said.

The dispute has raised new questions about the role of utility regulators as the Government continues its review into regulation. Last week Northern Ireland Electricity referred a similar rift to a judicial review.

Travel
travel
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
Sport
sportBesiktas 0 Arsenal 0: Champions League qualifying first-leg match ends in stalemate in Istanbul
News
Jamie and Emily Pharro discovering their friend's prank
video
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Sport
Manchester United are believed to have made a £15m bid for Marcos Rojo
sportWinger Nani returns to Lisbon for a season-long loan as part of deal
News
news
News
i100
Arts and Entertainment
O'Toole as Cornelius Gallus in ‘Katherine of Alexandria’
filmSadly though, the Lawrence of Arabia star is not around to lend his own critique
Life and Style
fashion
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

Quantitative Developer

£700 per day: Harrington Starr: Quantitative Developer C++, Python, STL, R, PD...

Web developer (C#, MVC4, HTML5, CSS3, Javascript, Jquery)

£30000 - £44000 per annum + Bonus+Benefits+Package: Harrington Starr: Web deve...

Senior Automation QA Engineer (Java, Selenium WebDriver, Agile)

£40000 - £65000 per annum + benefits+bonus+package: Harrington Starr: Senior A...

Web developer (C#.NET, ASP.NET, MVC3/4, HTML5, CSS3, JAVASCRIPT

£35000 - £45000 per annum + benefits+bonus+package: Harrington Starr: Web deve...

Day In a Page

Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?
Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

'I want to have contact with the audience, not iPhones'

Kate Bush asks fans not to take photos at her London gigs
Under-35s have rated gardening in their top five favourite leisure activities, but why?

Young at hort

Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

Beyond a joke

Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

Sadly though, the Lawrence of Arabia star is not around to lend his own critique
Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

A wild night out

Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

Comic Sans for Cancer exhibition

It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

Besiktas vs Arsenal

Five things we learnt from the Champions League first-leg tie
Rory McIlroy a smash hit on the US talk show circuit

Rory McIlroy a smash hit on the US talk show circuit

As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
Boy racer Max Verstappen stays relaxed over step up to Formula One

Boy racer Max Verstappen stays relaxed over step up to F1

The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
Fear brings the enemies of Isis together at last

Fear brings the enemies of Isis together at last

But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment