My Biggest Mistake: Sir James McKinnnon

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The Independent Online
Sir James McKinnnon, 63, director-general of Ofgas, began his career as a trainee accountant with a Scottish firm in 1946, then in 1952 joined the Army and spent two years in Korea. On his return he joined McFarlane Lang, the biscuit manufacturer, eventually rising to company secretary. He left that job in 1964 to work in management consultancy, and two years later joined the Imperial Group as an assistant accountant. After working his way up to become deputy chairman, he resigned in 1986 when the group was acquired by Lord Hanson, and took up his present appointment.

I was always of the view that the biggest mistake I ever made was to actually think Scotland would win the World Cup in Argentina in 1978. But on joining Ofgas in 1986 I made an even bigger one, which was to assume that British Gas would welcome development of competition.

I had been called upon by the Gas Act 1986 to enable competition to happen, and I assumed the company would read the Act and say: 'Well, these are the things we have to do. Best get on with it.'

But the company is a monopolist par excellence. In 1986 it owned most of the gas in the North Sea, took delivery of every therm that was landed in Britain, owned all of the pipelines in the UK and served every single customer who used natural gas.

You can't get much more of a monopoly than that, and it beats me why it should have come as such a surprise that this power was going to be restrained in some way.

I realised the company had misunderstood my function as a regulator when the time came to publish our first annual report in 1987. British Gas said: 'Tell you what you should do: send it along to us first, and we'll correct it.' Needless to say, I didn't.

A further report pointed out that there could be no competition without gas, and since British Gas had all of the gas, they should release some of it. The company said it was completely improper for me to make such a report. It took a huge effort before they started making gas available to competitors - five years later.

Then I suggested they should develop their accounting to find out how much profit was made in each segment of their gas supply. The response was: 'You don't need to know that.' I insisted, but it took almost three years to get that information.

Any advice I offered was rejected; they just thought I was interfering. It was clear British Gas didn't want to make any changes, and our relationship became progressively strained until I changed my approach.

They were employing delaying tactics. We were being bogged down by endless meetings, which seemed to come to a decision, but there always appeared to be a further snag and another round of discussion.

In 1987, we determined to do something about the fact that 61,000 households were disconnected each year. I called on British Gas to become sensitive to the needs of those who wanted to stay on the system but had difficulty in paying. After 18 months of discussion, without progress, I said I had no alternative but to refer it to the Monopolies & Mergers Commission.

Within a week, British Gas had agreed to amendments which meant that people could pay off their debts at a rate they could afford.

I found it disappointing that a threat worked where sensible dialogue had failed, but I have learnt - with regret - that drawn-out discussions no longer have any place. They waste time and hold back customer benefits.

Our relationship with British Gas hasn't improved, but we have toughened up our approach. These days, whenever a decision has to be made and we are at an impasse, we are forced to resort to the independent judgement of the MMC.

Life is too short for endless talk which is going nowhere.

(Photograph omitted)

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