Recs face monoploy inquiry after ignoring gas sales plea
Friday 23 January 1998
Five of the country's 14 electricity suppliers served notice last night that they would not comply with the request from Ofgas and Offer to stop selling gas until their own franchise markets are open to competition.
Eastern, the country's largest regional electricity company (Rec) and biggest independent gas supplier, went one step further by calling for a Monopolies and Mergers Commission inquiry into the matter.
The dispute has arisen because Centrica, the trading arm of British Gas, will see its monopoly disappear entirely this May or June while the electricity market will not be fully open to competition nationwide until June, 1999.
Centrica has argued that this gives the Recs an unfair advantage by enabling them to attack its market while theirs remain closed. But John Devaney, chairman of Eastern group, said: "Our electricity customers should not be forced unnecessarily to continue to buy their gas from Centrica when we are offering them considerably cheaper prices."
Centrica, he added, with 18 million customers, a national brand and enormous resources, would continue to dominate the market and an MMC investigation into this dominance was now necessary.
Apart from Eastern, the other Recs that have told Ofgas they do not intend to stop selling gas are Northern Electric and Midlands while London and East Midlands are also expected to ignore the regulators call.
In a joint statement late on Wednesday night, the regulators raised the prospect of referring Recs to the MMC if they did not give formal undertakings agreeing to suspend gas sales in their franchise areas.
John Roberts, chairman of Swalec and President of the Electricity Association, lobbied John Battle, the Energy Minister, over the industry's concerns at a meeting yesterday at which a five-month delay in electricity competition was formally sanctioned.
"The industry is very concerned about the measures proposed by Offer and Ofgas which appear to be anti-competitive," he said. The Recs claims that while they will be barred from doing anything other than providing information to gas customers, Centrica will be able to sign up households to cheaper electricity in readiness for the opening of the market.
Meanwhile, electricity chiefs also told Mr Battle that for every week the launch of domestic competition is delayed it will cost them an extra pounds 10m in preparing their computer systems. That would mean a five-month delay will cost an extra pounds 200m, bringing the total bill for the exercise to more than pounds 1bn. The electricity regulator has allowed the Recs to pass on only pounds 500m of the costs to customers.
Mr Battle said he was "not pleased" that customers were having to wait longer for competition to arrive but said it would have been irresponsible and irrational to press ahead with incomplete or partially tested computer systems.
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