Regulator set to approve British Gas price cuts in South-west

Clare Spottiswoode, the gas industry regulator, is poised to approve British Gas's controversial package of selective price cuts in a ruling which could provoke uproar among rival suppliers and have long-term consequences for competition.

Her decision on the discount scheme, which has cut some British Gas bills by up to 12 per cent in the first domestic competition trial area in the South- west of England, will not be announced until after the election. Earlier indications from Ofgas, the watchdog, of a pre-poll announcement were optimistic given an unexpectedly large response to the public consultation exercise.

Centrica, the demerged British Gas supply business, revealed the price cuts last month after losing 20 per cent of its customers to rival suppliers in Devon, Cornwall and Somerset since the trial began last May.

The package, the first time British Gas has varied its tariff on a regional basis, also gives direct debit customers a 6 per cent cut, doubling their discount, if they sign up for a year.

Ms Spottiswoode is understood to have told some rival gas companies that she is "minded" to let Centrica continue with the price cuts, known as Value Plus. The move would be another sign of the thaw in relations with the company since it demerged from British Gas , now BG, in February. Earlier this week Ms Spottiswoode indicated she would be sympathetic to Centrica's efforts to avoid Labour's windfall utility tax.

Ofgas has also studied the wording of the Gas Act which paved the way for competition. It says her role is to "establish" competition but does not say she must "sustain". Centrica has argued the loss of 20 per cent of its market share means competition has been achieved.

Critics of Value Plus argue it would transform the competitive playing field. The chief executive of a large oil group, who did not want to be named, warned the price cuts would discourage the company from moving into the domestic gas market. He said the group was waiting to see how competition developed and would examine potential profit margins.

Ofgas said it had received more than 80 responses to the consultation process, of which more than half were in Centrica's favour. The company has mobilised considerable support from some unusual sources, including letters to Ofgas from three of its banks privately arguing that the cuts were a vital plank of its business plan.

The Gas Consumers Council recognised Value Plus would benefit some consumers but strongly opposed its introduction. Sue Slipman, GCC director, warned that the decision could stifle competition as the industry moved towards full national choice next year.

Four of the largest independent suppliers, Beacon, Eastern, Calortex and ScottishPower, all vehemently opposed the price cuts. Evidence from Calortex claimed that, since the introduction of Value Plus, numbers of homes switching from British Gas had dropped alarmingly.

The independent gas companies say British Gas could extend the price cuts to the newest trial area of Kent and Sussex, where competition is more fierce. In two months Centrica has lost about 20 per cent of its customers. Ms Spottiswoode has told rival suppliers her ruling on the South-west would not necessarily apply to the South-east.

Alan Lias, Beacon's managing director, said competition was not established yet. "These are still trial runs. The damage has already been done by British Gas in encouraging customers to believe if they stay with the company they will eventually get the same discounts. There's still tremendous inertia in the market."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future