Pipeline rethink by British Gas

MARY FAGAN

Industrial Correspondent

British Gas has backed down over plans to sharply increase prices for the use of its pipeline system. The proposal had outraged rival suppliers who need to use the pipes.

After a meeting on Thursday with the watchdog, Ofgas, the British Gas pipeline arm, Transco, said it would issue "revised" prices, then give customers six weeks' grace before putting the changes in place.

The climb-down is a victory for Clare Spottiswoode, director general of Ofgas, although she warned: "We will not believe the battle is over until we see the whites of their eyes and see something on paper. I hope they will see sense and come back to the table with something which can be agreed. The other suppliers are extremely upset and we need to see something sensible put in place."

Rival suppliers - including North Sea producers and electricity firms - complained that the planned increases, in some cases up to 10 per cent, would have almost wiped out the margins for some firms. They were also aggrieved because the increases came as a surprise and some feared they had already been agreed by Ofgas.

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

In a letter to Ms Spottiswoode on 19 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."

In previous correspondence, Mr Moulson said that there appeared to be a "serious communications problem, since we have been talking to your directors and people for months".