OFT orders inquiry into LPG market

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The Independent Online

The embattled oil giant Shell came under further regulatory scrutiny yesterday after the Office of Fair Trading ordered an investigation into the £100m market for household supplies of liquefied petroleum gas.

Shell is one of four suppliers who between them control more than 90 per cent of the domestic LPG market. The others are the market leader Calor, now part of the privately owned Dutch group SHV Holdings, BP and Flogas, which is owned by DCC and acquired British Gas's LPG interests.

The OFT has referred the industry to the Competition Commission following a steady stream of allegations about anti-competitive practices. These, it said, included hefty charges for switching supplier, lengthy contracts, long notice periods and penalty clauses for early termination.

There are about 100,000 domestic users of LPG in the UK - mostly households in rural areas that do not have access to a mains gas supply and use LPG for heating, cooking and hot water. An OFT spokesman said: "We have had a steady stream of complaints but they have been persistent and consistent."

One of the complaints is that it costs upwards of £100 to change supplier because a customer has to pay for one tank to be taken away and another installed. In addition, contracts last anywhere between three and five years and notice periods were often three months.

The OFT said that in one case a supplier required customers to continue paying right through to the end of a contract in the event of early termination.

John Vickers, the chairman of the OFT, said: "There are several features of this market which appear to restrict competition and customer choice."

The OFT has been investigating the domestic LPG market since January and has already forced some suppliers to amend the terms of their contracts. The Competition Commission has no set date by which to report back, although the longest it can take to conduct an investigation is two years.