North Sea fears Ofgas

British Gas and other gas suppliers fear that Ofgas, the industry watchdog headed by Clare Spottiswoode, will seek to extend its remit to gas supplies from the North Sea.

The concern comes in the wake of Ms Spottiswoode's toughening stance that saw consumers' gas bills cut again last week and previous indications that she would like Ofgas to regulate other aspects of the gas industry.

This follows signs that the Gas Forum, a group of gas shippers, are wavering in their united front against British Gas. The Forum was set up to press for substantial cuts in access prices charged by TransCo, the privatised utility's pipeline arm which is soon to be hived off. Several firms have withdrawn from active lobbying against British Gas to reduce the risk of wider regulatory backlash.

A report for the Gas Forum by accountants Arthur Andersen had said that British Gas charges should be slashed by up to 40 per cent. Ofgas had proposed a maximum 28 per cent cut, which would slash its revenues by up to pounds 600m.

Consumers stand to benefit from an pounds 8 a year cut in their average bill. British Gas has criticised the move as misconceived and yet another blow, following a review of TransCo's pricing already published in May.

Philip Rogerson, deputy chairman, said the company would continue to fight both proposals and was confident that, if a Monopolies and Mergers Commission referral arose, its stance would be justified.

Another industry executive said British Gas's arguments to date had been emotive. "The MMC is not a one-way option. At the last MMC referral in 1993, they took the risk and lost out badly. There must be heads at BG who see a lot of downside."

A spokeswoman for US gas supplier Amerada Hess said British Gas had failed to give a good reason why the Ofgas proposals should be overturned.

A source at United Gas said the MMC review would take into account the Gas Forum's original report, including allegations that BG has failed to account properly for pounds 2bn in revenues earmarked for infrastructure work: "The suggestion is that BG has been using TransCo to subsidise the rest of the group's activities, including expansion overseas."

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