Ofgas considers delaying gas competition

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The Independent Online

Industrial Correspondent

Ofgas, the gas industry watchdog, has launched an investigation into whether competition in the domestic gas market should be delayed from the planned starting date of 1 April. Any slippage would be extremely embarrassing for the Government, which until now has been adamant that the opening of the market - initially to 500,000 homes in the South-west - will go ahead on schedule.

It has also emerged that the issue of licences for new public gas shippers and suppliers will be postponed for a month until 1 March following a meeting on Saturday between the Department of Trade and Industry, Ofgas and the industry.

The so-called "appointed day" on which licences will be issued was originally to be in October but was postponed to December and then February before this latest hitch.

Ofgas is now thought to have appointed Chris Rees of Touche Ross to examine whether 1 April remains feasible. One industry source said there were concerns that the computer systems and arrangements for coping with multiple suppliers would not be ready and that a bad start to competition would result in lack of confidence. "This has got to work," he said.

The DTI declined to comment. But it is thought that there is now acceptance that the project may slip. The DTI had been determined that competition for the 500,000 homes would begin in April and be expanded to 2 million households in 1997, with the entire country following by the end of 1998. The timetable for opening the market has been widely considered to be extremely tight.

A spokesman for British Gas' pipeline arm, Transco, confirmed the delay in the issue of licences. But he said Transco, whose pipelines will carry gas for other suppliers, is "working its socks off" to ensure that everything is ready on time. Key to the start of competition are the agreements governing the use of the pipelines and the arrangements to ensure that people get the right bills.

Rivals to British Gas, which include North Sea producers and electricity firms, have privately claimed that the company is dragging its feet over competition. Companies including Amerada Hess have promised to undercut British Gas by about 15 per cent - about pounds 50 for the average household - in the South-west.

British Gas, which fears it could lose the most lucrative customers through "cherry-picking" by others, has yet to say what it will do in response. In the industrial and commercial market, where competition is already allowed, British Gas has seen its market share decimated, although it is now fighting back.

In the consumer market the company faces the thorny problem of whether it should cut prices in the South-west to match competitors while leaving prices unchanged elsewhere.