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Regulator decides against wider probe into TransCo

OFGAS, the gas regulator, has decided not to broaden the terms of its reference to the Monopolies and Mergers Commission into British Gas's pipeline business.

The terms will be passed to the MMC on Monday morning, with an announcement set for 11am. Sources close to the inquiry say any widening beyond tariff issues is unlikely. Clare Spottiswoode, the head of Ofgas, had warned she would consider including an examination of the structure of TransCo, the pipeline business.

Such a move could have had serious ramifications for the demerger of British Gas, which is due to go ahead in 1997 with separate trading - when the domestic gas supply business will be cut off from the distribution and exploration and production operations. The argument from Ofgas was that excess profits by TransCo should not be used to subsidise its exploration arm.

On Friday, there was a last-minute scramble by British Gas to have sight of the draft terms, before they were sent to the MMC.

The regulator can allow a company to see a draft before it goes to the MMC, and the company can request last-minute changes. However, a request from British Gas to see the draft, immediately after its decision to seek a Monopolies referral two weeks ago, met with an ambiguous response from Ofgas on Friday morning.

British Gas then faxed another request for sight of the draft, and was still awaiting a response at the close of business on Friday evening.

Deputy chairman Philip Rogerson, who has handled the company's dealings with Ofgas, said he was disappointed not to have had the option to suggest changes. "Clearly it would have been a courtesy to have seen the terms, before they were sent to the MMC."

It was customary, although not obligatory, he said, for the regulator to share the terms with an utility before sending them to the MMC.

The news that TransCo's structure will not figure as a separate issue will be a relief to investors. "We are already punch drunk over the events of the last six months," said one analyst. "It's better [the structure of] TransCo isn't part of the investigation."

Mr Rogerson added that the precedent of the 1993 referral meant the MMC would be unlikely to enforce any changes to the current structure.