British Gas told to scrap ad campaign

MARY FAGAN

Industrial Correspondent

Ofgas, the gas industry regulator, has instructed British Gas to withdraw advertisements offering cheaper prices for businesses spending more than pounds 1,100 a year. The clampdown is the latest in a series of embarrassments for British Gas, which has been dogged by bad publicity since last year.

Ofgas attacked the advertising campaign as an attempt by British Gas to pre-empt possible relaxation of pricing restrictions, a decision on which is expected on Friday. British Gas is hoping the regulator will abolish the need to publish its prices for all businesses, which would allow it to negotiate individual contracts and undercut rival suppliers.

A spokesman for Ofgas said: "We are really very cross about this and have asked them to discontinue the ads." He said there had been complaints from small suppliers of gas, some of which fear being squeezed out of the marketplace if British Gas is free to price as it pleases.

At present, British Gas can negotiate prices with very large customers, but has to publish price schedules for all other contract customers. Ofgas is considering removing the schedules now that the company's share of the total contract market is below 40 per cent. Business Gas, the British Gas unit supplying business customers, has said it is being forced to compete with an arm tied behind its back.

A Business Gas spokesman said the ads aim to show the company is more able to respond to customers as a result of regulatory changes.

The advertising row coincides with complaints by smaller rivals that British Gas is offering cut-throat prices for wholesale gas. These firms buy wholesale from British Gas and say they are being charged about twice as much as other wholesale customers. David Aron, a director of independent supplier Bell Gas, said: "We are not being allowed to compete on equal terms."