Minister to intervene in pounds 700m gas row

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The Independent Online

Industrial Correspondent

The Government has pledged support for British Gas's efforts to renegotiate long-term contracts with North Sea producers, which are forcing the company to buy more gas than it can sell. Tim Eggar, Minister for Energy and Industry, said he could not take a direct role but would act as "moderator or facilitator" if asked, or "if I thought matters were getting out of hand".

Mr Eggar's statement at a seminar in London marks a significant change in his public stance on the contracts, which until now the Government has said were a matter for the industry. It comes amid mounting commercial pressure on British Gas, which by the end of this year will have been forced to buy about pounds 700m worth of gas which it cannot yet sell. Some City analysts believe that the figure will soar well beyond pounds 1bn within a few years.

Mr Eggar said that the introduction of competition has "changed the underlying basis of these contracts", which were entered into when British Gas was a monopoly buyer and seller of gas throughout the UK. He said that extending competition to domestic customers, beginning next year, would put further pressure on the company.

"British Gas can no longer assume all the market risks of selling gas. In the industrial and commercial market, BG's share has fallen from virtually 100 per cent in 1990 to around 35 per cent today," he said.

Mr Eggar said that failure to renegotiate the contracts, which is being strongly resisted by some large producers, could have "wider implications for the the development of the UK continental shelf".

The company was further embarrassed yesterday by a survey which underlined its lack of popularity and showed that its public believes it gives poor value for money.

The Mintel survey showed that, in the eyes of consumers, British Gas lags behind other household names in value for money and trustworthiness. It also falls behind in terms of being in touch with customers.

Mintel International said that the 1995 survey coincided with two negative news items for British Gas: the impending pay increase to Cedric Brown and the decision to allow discounts to direct-debit customers.

Boots, the high-street chemists, came top in four of the five categories. The only one it failed to win was the social and environmental awareness poll, topped by Body Shop.

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