Rivals call for TransCo breakup

A REPORT saying that British Gas used up to pounds 2bn over 10 years from its regulated pipelines business TransCo to cross-subsidise other activities has rekindled demands that the energy giant be split up even more radically than already planned.

The revelation comes from the Independent Review of TransCo's Cost and Asset Base by accountants Arthur Andersen, a draft copy of which has been obtained by the Independent on Sunday.

Last month BG surprised the market with plans to split itself into two, to protect TransCo from up to pounds 40bn of liabilities on overpriced gas contracts. The review was commissioned over a furious but separate row over access charges made to competitors for use of BG's pipelines.

Andersen has found that costs of pounds 290m last year alone had been incorrectly or questionably charged to TransCo by other BG activities, including headquarters. That artificially bumped up the charges that TransCo passed on to independent gas shippers using the network.

The report also reveals that the valuation of TransCo's assets may have been inflated by including decommissioned and redundant facilities, such as the Canvey terminal in the Thames Estuary, which was booked at pounds 108m even though it had been mothballed.

British Gas has tacitly accepted some of the findings, saying it would write down TransCo's assets by pounds 200m, but it insisted that overall the report vindicated it. "It clears the air once and for all," a company spokesman said.

Rivals, though, said they would be taking the matter up with Clare Spottiswoode, the industry regulator, and the Monopolies and Mergers Commission, which is expected to hold three separate hearings into BG in coming months.

They are calling for TransCo International to be further broken down into its constituent pipeline and unregulated exploration arms. Although under the Gas Act which came into effect on Friday, British Gas is required to ring fence the accounts of the regulated business to ensure that there is no cross-subsidisation, opponents say that is not enough.

"Even with the best of intentions there's no way British Gas can continue to wear two hats after this," said one shipper. "The monopoly pipeline business has to be completely separate."

TransCo's internal studies put the asset overvaluation at pounds 273m, although critics said the amount that needs to be written off could be pounds 5bn of its pounds 18bn assets.

But while the report says that the overall values are "reasonable", it also highlights "obvious errors and omissions" and "misstatements".

The report said it was "specifically concerned" about Trans- Co's 50 per cent share of the cost of running the British Gas HQ. Fairer accounting could have recut that to 34 per cent, said the report.

On the other side of the ledger, it suggested the pounds 200m a year raised from customers to fund the rebuilding of the pipeline network after 2010 could be trimmed to just pounds 30m.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Business Development Executive - Affiliates & Partnerships

£20000 - £35000 per annum: Recruitment Genius: This multi-award winning foreig...

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor