Ofgas backs end to Gas's public sales

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Ofgas, the gas industry regulator, is in favour of British Gas pulling out of public gas supply, as long as it sells the business piecemeal. The company will for the first time be allowed to abandon public supply under the Gas Act, which is expected to be in place later this year.

Clare Spottiswoode, director general of Ofgas, believes if British Gas sold the business in pieces it would help competition. Ms Spottiswoode said she had not discussed it with Richard Giordano, British Gas' chairman "because I do not want to know what his strategy is."

British Gas denies plans to pull out of public supply, but is understood to have considered the move and was keen that the bill should allow it to. A senior executive said recently that one of the biggest mistakes the company had made was to resist divestment of the supply business when it was recommended two years ago by the Monopolies and Mergers Commission.

Under the MMC's proposal, which was rejected by the Government, the company would have been forced to sell the gas trading arm by 31 March 1997. British Gas said at the time that the divestment would cost pounds 130m and that consumers would ultimately foot the bill.

Mr Giordano, who took over as chairman last year, has repeatedly stressed the importance of the company's international business and the need to be a player in the global marketplace. British Gas's rivals, including North Sea producers and electricity companies, are increasingly convinced that it will focus in future on the UK transport arm - which carries gas for dozens of companies - and further development overseas.

One leading independent supplier said: "We believe there have been serious discussions about this between British Gas and the Government for some time. We are concerned because competition must be seen to bring choice and that ought to include being able to stay with the national player if they so choose."

He said the view in the industry is that British Gas should be prevented from bailing out until 2003 at least, by which time competition in domestic supply should be in place. The market is due to be fully opened by the end of 1998, with a pilot scheduled for April 1996, but there is likely to be a five-year transition period while new market entrants establish themselves.

Separately, it emerged that the Department of Trade and Industry has written to independent gas companies reassuring them that the trial next April will proceed as planned. The industry was angered last week when the Government said that there was no time before Parliament rises to complete the passage of the Gas Bill, meaning that it is unlikely to receive Royal assent before October.

The decision angered Ofgas as it would leave little time to licence new entrants before the April pilot. But the DTI and the Treasury are thought to be looking at ways of establishing Ofgas's new licensing office before the Gas Act is in place.