Ofgas plans competitive boost

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The Independent Online
OFGAS, the gas industry regulator, is devising a way to introduce competition into the domestic gas market without the need for legislation, writes Mary Fagan.

The scheme, which needs government approval, involves compensating British Gas for being the only gas supplier with obligations to provide universal service and to make special arrangements for old and disabled customers.

Ofgas is worried that legislation for the introduction of competition has been squeezed out of the Parliamentary schedule for the autumn because of lack of time and the desire to privatise part of the Post Office. Unless reinstated, plans for domestic gas competition to begin in 1996 could be under threat.

The regulator's alternative would be to lower the annual consumption threshold below which British Gas's rivals may not supply gas. That threshold is an annual 2,500 therms, compared with about 300 therms for the average household.

Lowering the threshold could be done by amendments to existing legislation. But rival suppliers would not be issued with full public gas supply licences and, unlike British Gas, would not have obligations to supply the less lucrative customers. They would be free to cream off whoever they wanted as customers and would have no responsibility towards the elderly and disabled.

To offset this, Ofgas is thought to favour changes allowing British Gas's transportation arm to charge rivals more for using its pipes. The extra funds could then be transferred to British Gas's trading arm to help fund the social and universal service obligation.