Centrica puts gas meter business up for sale

The business responsible for a million coin and electronic pre- payment gas meters across the country has been put up for sale by Centrica, the demerged British Gas supply operation, in a move which will raise further doubts about the costs of supplying low-income customers as domestic energy competition emerges.

British Gas Trading (BGT), Centrica's main supply arm, has recently invited offers to buy or run the pre-payment meter operation through a notice in the European Commission's official journal, though the likely price of any deal is being kept commercially confidential. The business, called Quantum after the electronic smartcard meters which are progressively replacing the traditional coin-operated variety, was inherited by Centrica when the old British Gas split itself into two.

The central Quantum office is based in Newcastle and employs around 150 staff, mostly carrying out "back office" tasks, with many employed on short-term contracts. Quantum, which remains a monopoly used by rival independent suppliers as well as BGT, runs around a million pre-payment meters, though according to the Gas Consumers' Council (GCC) only about 900,000 are in use at any time. The decision to hive off the division follows the establishment earlier by BGT of a joint venture with Group 4, the security group, to offload its main household meter reading business, AccuRead.

BGT confirmed it was examining selling or outsourcing the Quantum office. A spokesman said: "BGT is looking at how this operation will run in the future, including a possibility of this service being provided outside British Gas. Investigations into a number of options are at an early stage and the tendering process is only part of that ongoing investigation."

The sale comes at a sensitive time for the industry, as the Government has instructed Ofgas, the regulatory watchdog, to review differences in charges for pre-payment customers in competition trials under way in the South of England. The GCC has been increasingly concerned at the apparent reluctance of some independents to supply pre-payment customers, given the additional costs of up to pounds 80.

Sue Slipman, director of the GCC, warned that British Gas would have to invest up to pounds 1m in improving the system before selling it off.

"If they want to sell it, they've got to spend money on it first. The issue is about how you get the investment in the system, especially if the Government stops suppliers from cherry-picking more affluent customers. It's a problem for the industry as a whole," said Ms Slipman.

The GCC's solution was to impose a levy on suppliers who had not taken on a proportion of pre-payment customers.

John Battle, the Industry Minister, warned last week that "unbundling" costs in the industry should not make the poorest customers worse off, warning of the dangers of "fuel poverty". In one case the GCC found an independent gas supplier was charging 34 per cent more to supply pre-payment meter customers than those on direct debit.