DTI may speed up plan to break gas monopoly: Customer could choose supplier by 1996

Click to follow
The Independent Online
THE GOVERNMENT is preparing to end British Gas's monopoly over the domestic gas market much more quickly than recommended by the Monopolies and Mergers Commission, according to rival gas suppliers.

The drive to introduce greater competition could result in the company's 18 million domestic customers being free to choose an alternative supplier as early as 1996 or 1998 - four years sooner than the MMC recommended. At the same time, ministers are thought to have rejected the MMC recommendation that British Gas be divested of its trading arm.

Michael Heseltine, President of the Board of Trade, is expected to announce the shake-up of British Gas before Chistmas and possibly as early as this week.

The MMC report, delivered to him in July, recommended that British Gas be broken into separate gas trading and gas storage and distribution businesses in 1997, the ceiling on its domestic monopoly cut from 2,500 to 1,500 therms and full competition introduced three to five years later. Private talks with Mr Heseltine last week, however, have left rival gas shippers convinced that the Government will act more quickly.

'We are reasonably confident that the MMC's timetable has been blown out of the water,' one said. 'It is not now a question of whether but when competition will start.'

Mr Heseltine is understood to have expressed concern, though, that acting so speedily could force prices up, cause job losses, and damage British Gas's standing as a world-class company and the interests of its 2 million shareholders.

Independent energy companies have lobbied hard to refute British Gas's claim that abolishing the monopoly would leave 12 million consumers worse off. Peter Bryant, deputy chairman of Utilicorp, said it could undercut British Gas's prices by 8 per cent.

Utilicorp also published figures suggesting that if the monopoly ended in 1996 the independents might account for a 25 per cent share of the domestic market by 2000, rising to 30 per cent in 2005.

British Gas has lost 60 per cent of its firm contract customers and 20 per cent of its large tariff customers to independent suppliers, but these two markets account for only 8 per cent of total gas revenues.

Cedric Brown, chief executive of British Gas, said yesterday that the company would not shrink from competition, provided it was fair.

In a speech to the Royal Institute of International Affairs, Mr Brown said: 'Until now the field has been tilted in favour of new entrants to the market. Once competition has developed, the field must be levelled. We expect our competitors to share the same obligations and responsibilities if they want to share the same market.'

Comments