Pipeline dispute for British Gas

Click to follow
British Gas faces a fresh row over charges levied on other companies that need to use its pipes. At least seven companies, including Amerada Hess and Total Gas, are understood to have warned the company that they will use powers under the Gas Act to have planned increases in charges overturned by the watchdog, Ofgas.

Under the Gas Act, companies using the pipes have the right to ask Clare Spottiswoode, director general of Ofgas, to block price changes and impose new - and, they hope, lower - ones on British Gas.

Use of this power, never called on before by the industry, would be the latest in a series of blows suffered by the company and would come only weeks before the domestic market is due to be opened to competition in the South-west. Rivals to British Gas, which include offshore companies and electricity firms, fear that high pipeline charges would squeeze their margins enough to make it harder to compete in the newly opening marketplace. Some of the new entrants are planning to undercut British Gas's domestic prices by up to 15 per cent.

The debacle over pipeline charges began last year when British Gas outraged its rivals with proposals to increase its charges for use of its pipelines by up to 10 per cent in some cases and was persuaded by Ofgas to think again. But the revised prices - due to come into effect on 1 March, are still much higher than the industry believes is justified or is prepared to accept.

A spokesman for British Gas's pipeline arm, TransCo, said the company was aware of the impending battle but was not intending to change its stance.

"We have sent out revised prices and we are sticking to those. It is a less high increase than originally proposed and it will come into effect as planned on 1 March," he said.

Ofgas declined to comment on the situation but said it was aware of the discontent. Ms Spottiswoode cannot intervene until directly asked to do so and the Gas Act requires those complaining to give British Gas about four weeks' notice before they attack. The first calls for action are expected to come within days.

Under its price control formula, TransCo is supposed to keep increases in charges to inflation minus five percentage points. But the plans for 1 March would see prices for some shippers rise by several points above inflation because of technical loopholes in the way the formula works.

The row has angered TransCo, which accounts for the bulk of British Gas's multi-billion-pound assets. When Ofgas first intervened last year, Harry Moulson, TransCo's managing director, complained that his company had been in negotiation with the regulator for four months and felt that the planned increases were in line with regulations governing the industry.

In a letter to Ms Spottiswoode in October, Mr Moulson said: "I must point out that TransCo has been completely open with Ofgas about the effects of the new prices on the different markets, and I find it impossible to believe that Ofgas did not already have sufficient information to make a judgement on whether or not the prices were in accordance with the authorisation."