OFT panned over gas: Numerous abuses found in scheme to promote competition

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THE OFFICE of Fair Trading is under fire for its handling of the gas release scheme set up three years ago to promote competition in the gas supply industry.

Under the terms of the scheme, British Gas is compelled to sell an agreed amount of gas as a wholesaler to independent gas suppliers approved by the OFT. However, there were numerous abuses of the system - including stagging and multiple applications - last year.

An initial 400 million therms were allocated to the 32 companies already trading. Another 70 applied for the remaining therms, but many of these were multiple applications. Some companies also sold their gas on for a quick profit, rather than setting up as suppliers in accordance with the aims of the scheme.

Four companies are believed to belong to a Texan businessman, another two to a husband-and-wife team. Many remaining applicants appear to be based at private addresses. A survey by Gas Strategies, the consultancy, concluded that 'at least 39 and probably many more who don't answer their phones are just vehicles for other marketers'.

In fact, United Gas, the partly American-owned supplier, accounts for 10 of them. But the company says the OFT explicitly approved the applications in light of the business plan it proposed. An OFT spokesman confirmed that United Gas 'had discussions with us about its strategy, and we said we were satisfied that it didn't breach the rules'.

Nevertheless, the move by United Gas has angered rival traders, some of whom say they have been prevented from securing enough gas to enter the market. They argue that, approved or otherwise, it was multiple applications that diluted the volume of gas each company received.

The OFT has attempted to ward off criticisms by claiming that British Gas formulated the terms. 'British Gas drew up the rules. It then ran them past us. We might have changed some, but at the end of the day we agreed,' said a spokesman.

However, British Gas recalls events very differently. 'OFT drew up the rules. Obviously there was consultation between the various parties, but at the end of the day it's their ownership,' said a spokesman.

The critics include Sir James McKinnon, former head of the industry regulator Ofgas. 'OFT administered that programme. It did a crummy job and ignored eveybody,' said one industry expert.

Responsibility for the gas release programme has now been transferred to Ofgas.