Ofgas objects to Centrica sale of meter division

Centrica, owner of the British Gas supply business, is facing action by Ofgas, the industry watchdog, over moves to sell its division responsible for a million pre-payment meter customers to the company that manufactures the meters. As Chris Godsmark, Business Correspondent, reports, the move has already aroused concern from the Gas Consumers Council.

British Gas is selling the Central Quantum Office, based in Newcastle, to Landis & Gyr, the Swiss group which is one of the world's leading suppliers of utility meters and payphone systems. The two companies are expected to sign the deal, for an undisclosed sum, in the next two weeks.

A British Gas spokesman last night confirmed that a sale was imminent. "We've been discussing outsourcing Quantum for some time and hope a deal can be struck in the near future."

The Quantum Office, which employs 150 people, administers about a million gas meters in some of the UK's poorest households, including those using coins or electronic smart cards. Landis & Gyr already manufactures the meters for British Gas, which has a monopoly over the pre-payment system.

It emerged yesterday that under British Gas's existing licence Ofgas would no longer be able to control Quantum's charges to gas suppliers after the sale, which could hit pre-payment consumers. Ofgas has proposed toughening British Gas's operating licence to prevent an outside bidder from raising charges and has invited views from rival suppliers.

The Gas Consumers Council said it was concerned that Landis & Gyr could try to raise charges to fund investment in Quantum, which has been criticised as being outdated and expensive to run. Sue Slipman, the GCC's director, said: "Any sale of Quantum without sorting out its problems first would mean you end up with a monopoly you couldn't control. We are very worried about that."

The sale comes at a sensitive time in the gas industry, with Ofgas this week expected to rule on national price cuts planned by British Gas which could see its pre-payment customers enjoy much lower reductions than those paying by direct debit. British Gas is planning to knock 9 per cent off bills from 12 January, but has frozen pre-payment charges while Ofgas reviews the system.