Poorer customers will not benefit from BG price cuts

Ofgas, the gas watchdog, yesterday launched an investigation into price cuts planned by British Gas which would see 3 million of its poorest customers excluded from reductions in bills. The announcement follows pressure from the Gas Consumers Council, which had argued the proposals could discriminate against certain customers. Chris Godsmark, Business Correspondent, reports.
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British Gas is proposing to slash an average of pounds 28 off domestic gas bills from January, a cut of about 9 per cent. But Centrica, the demerged British Gas supply business which continues to use the familiar brand name, said only the 16 million households which paid by direct debit or settled their accounts promptly would benefit.

One million homes with prepayment meters would see no reduction while a further 2 million low-income customers using a variety of payment plans would mostly see cuts of less than 1 per cent. British Gas said it was waiting for the results of a review of the prepayment meter system by Ofgas before making any changes to these prices.

About half of the cuts are the result of reductions in gas transportation charges under a new price formula. The rest of the reduction stems from the abolition of the gas levy, a tax on old North Sea gas contracts, in the Budget and cheaper wholesale prices paid by British Gas.

The Gas Consumers Council (GCC) claimed all consumers should benefit and this week used its powers under the gas legislation to ask Ofgas for a formal probe. John Battle, the industry minister, was also unhappy with the plans and is thought to have expressed concern during a meeting with Centrica's top management on Wednesday.

The watchdog, led by Clare Spottiswoode, the industry regulator, said it hoped to complete its new investigation by the end of the year. It will look at whether the reductions discriminate unduly between different groups of consumers. The probe will run in parallel with the look at the extra costs of servicing prepayment households.

Sue Slipman, the GCC director, said the investigation was exceedingly good news:"Clearly the regulator has accepted there's a case to investigate and we welcome that. There was a lot of public shock about the plans."

An Ofgas spokesman signalled that Ms Spottiswoode was also concerned at British Gas's proposals. "We guess that they can make savings and prepayment customers should get a reduction," he said.

Last night British Gas hinted that Ofgas had previously approved the price cuts but had been prompted to investigate after the GCC's intervention. In a statement the company said it hoped Ofgas would reach the same conclusions as it had before the new prices were announced last week.

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