McKinnon may quit Ofgas early

Sir James McKinnon, head of the gas watchdog Ofgas, may leave his job early because of a wide-ranging reference of British Gas to the Monopolies and Mergers Commission by the Government. Sir James, who had favoured a narrow reference on the British Gas pipeline business, is due to end his term in August 1994.

The decision by Michael Heseltine, President of the Board of Trade, to order a sweeping reference was at the request of British Gas.

It will take at least a year and could have important consequences for the entire gas industry. Sir James believes that Ofgas would play a leading role in implementing the changes and that someone with only a year to run in office is not the person for the job.

He is also concerned that because of a wider and longer investigation, arrangements for other gas supply companies to use the British Gas pipeline and storage system will not be in place for his target date of October 1993.

This deadline has already slipped by a year after British Gas and Ofgas failed to agree on the price the company could charge other suppliers for using the pipes.

Sir James's willingness to leave early has fuelled speculation over a rift between him and Mr Heseltine, which Ofgas denies. British Gas, whose relationship with the regulator has reached an all-time low, refused to comment on the issue.

Meanwhile Ofgas is attempting to finalise interim arrangements with British Gas under which other companies can use the pipes over the next year.

Before the MMC reference, British Gas was demanding a rate of return on the pipeline system of between 6.7 per cent and 10.8 per cent. Interim arrangements being imposed by Ofgas assume a rate of return of 4.5 per cent. British Gas has said that this is unacceptable in the longer term.

Ofgas has warned that it will intervene to help companies that feel they are being treated unfairly in the terms and conditions for using the pipes. Sir James said: 'If these matters trouble other gas shippers, they know that they can come to us.'

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