Centrica's Rough deal 'may hurt competition'

The energy regulator Ofgem yesterday warned Centrica's planned purchase of the undersea gas storage facility Rough could damage competition and started canvassing for views on the deal.

The watchdog, which is run by the chief executive, Callum McCarthy, said its initial view on the planned transaction was that it "might be detrimental to competition in the gas and electricity supply markets".

In addition, the Office of Fair Trading said yesterday it was also looking into the deal to ascertain whether it should be referred to the Competition Commission for investigation. Shares in Centrica closed down 4p at 165p.

The moves, which had been expected, come less than three weeks after the utility announced it was buying the Rough facility for £304m.

The deal has raised competition concerns because it will bring 85 per cent of the UK's total gas storage capacity under the control of British Gas, Britain's biggest gas supplier with 65 per cent of the market.

Centrica has said it expected to have to give undertakings to ensure that its gas storage and gas trading operations were kept strictly apart and that rival gas suppliers were given access to the storage facility on non-discriminatory terms.

It also expected to say that it would continue selling the majority of Rough's capacity to other suppliers, using only about 25 to 30 per cent of the storage available for itself – the same amount that it currently takes.

Ofgem said yesterday it wanted to hear the views of interested parties by 11 December to enable it to advise the director-general of Fair Trading. It is particularly keen to ascertain whether any potential affect on competition could be addressed by "undertakings" agreed between Centrica and the Secretary of State for Trade and Industry.

Centrica bought Rough from the distressed US energy group Dynegy, which itself acquired it from BG Group for £421m last year.