Ofgas blocks pipeline rises

Ofgas, the gas industry watchdog, has blocked British Gas's attempts to raise prices sharply for other suppliers who need to use its pipelines, and called on the company to think again.

The move follows bitter complaints from British Gas's rivals, including North Sea producers and electricity firms.

The pipelines are the last bastion of British Gas's monopoly and represent the bulk of the group's assets in the UK. They are the part of the company that would be retained if British Gas eventually decided to sell off its supply business, which faces rapidly increasing competition.

Clare Spottiswoode, Ofgas's director general, has ordered the pipeline arm, Transco, to reexamine the increases, which some suppliers say will average almost 10 per cent.

In a letter to Transco last week, Ms Spottiswoode said that the price increases were neither agreed nor approved by Ofgas and needed to be proved to be fully justified before they could go ahead.

A Transco source said: "We have already spent four months talking to Ofgas about the pricing structure and thought we had it sorted. Whether we re-visit the prices remains to be seen." Ofgas is angered by restrictions which make it impossible for the regulator to make public certain information on Transco and how it decides its prices. The lack of openness also causes mistrust and nervousness among companies that need to use the pipes.

One industry source said: "Transco has no competition and any information on it should be in the public domain." Another said: "The type of increase Transco is talking about would quite frankly wipe out the margin for some players in the industry." There is suspicion among some suppliers that Transco is giving preferential treatment to its own gas trading arm.

In the letter, Ms Spottiswoode called on the company to "operate with the greatest amount of transparency possible". She added: "It is necessary to give all parties the opportunity to examine all aspects of the pricing proposals to ensure that the prices are appropriate."

She said that in future she would like Transco to publish any proposed price changes at the same time as they were provided to Ofgas. The row comes at a sensitive time in the industry, which is working towards the start of domestic competition in April next year.

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